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PLEASE NOTE: The following transcript is a portion of the official hearing record of the Committee on Transportation and Infrastructure. Additional material pertinent to this transcript may be found on the web site of the Committee at [http://www.house.gov/transportation]. Complete hearing records are available for review at the Committee offices and also may be purchased at the U.S. Government Printing Office.







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JULY 10 AND 17, 1997

Printed for the use of the

Committee on Transportation and Infrastructure


BUD SHUSTER, Pennsylvania, Chairman

THOMAS E. PETRI, Wisconsin
HOWARD COBLE, North Carolina
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JOHN J. DUNCAN, Jr., Tennessee
JAY KIM, California
STEPHEN HORN, California
BOB FRANKS, New Jersey
JOHN L. MICA, Florida
SUE W. KELLY, New York
RAY LaHOOD, Illinois
FRANK RIGGS, California
CHARLES F. BASS, New Hampshire
JACK METCALF, Washington
ROY BLUNT, Missouri
JOSEPH R. PITTS, Pennsylvania
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JOHN R. THUNE, South Dakota
CHARLES W. ''CHIP'' PICKERING, Jr., Mississippi
JON D. FOX, Pennsylvania
J.C. WATTS, Jr., Oklahoma

NICK J. RAHALL II, West Virginia
ROBERT A. BORSKI, Pennsylvania
ROBERT E. WISE, Jr., West Virginia
BOB CLEMENT, Tennessee
ROBERT E. (BUD) CRAMER, Jr., Alabama
ELEANOR HOLMES NORTON, District of Columbia
PAT DANNER, Missouri
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JAMES E. CLYBURN, South Carolina
BOB FILNER, California
FRANK MASCARA, Pennsylvania
GENE TAYLOR, Mississippi
BILL PASCRELL, Jr., New Jersey
JAY W. JOHNSON, Wisconsin
JAMES P. McGOVERN, Massachusetts
TIM HOLDEN, Pennsylvania

Subcommittee on Public Buildings and Economic Development

JAY KIM, California, Chairman
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JOHN COOKSEY, Louisiana, Vice Chairman
JOHN J. DUNCAN, Jr., Tennessee
BUD SHUSTER, Pennsylvania
(Ex Officio)

ELEANOR HOLMES NORTON, District of Columbia
TIM HOLDEN, Pennsylvania
(Ex Officio)


Proceedings of:
July 10, 1997
July 17, 1997

JULY 10, 1997

    Singerman, Dr. Phillip A., Ph.D., Assistant Secretary for Economic Development, Economic Development Administration, U.S. Department of Commerce
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    Underwood, Hon. Cecil H., Governor, West Virginia, on behalf of the Governors of the Appalachian Regional Commission

    White, Jesse, Jr., Federal Co-Chairman, Appalachian Regional Commission


    Shuster, Hon. Bud, of Pennsylvania


    Singerman, Dr. Phillip A

    Underwood, Hon. Cecil H

    White, Jesse, Jr


    White, Jesse, Jr., Federal Co-Chairman, Appalachian Regional Commission, report on ARC's Long-Term Plan

JULY 17, 1997

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    Burchell, Dr. Robert W., Ph.D., Rutgers University, Center for Urban Policy Research

    Cavender, Richard A., Executive Director, Meramec Regional Planning Commissission, Rolla, MO, and President, National Association of Development Organizations

    Ching, Franklin G., Town Representative, Natick, MA, and President, National Association of Regional Councils, on behalf of the Coalition for Economic Development

    Kanjorski, Hon. Paul E., a Representative in Congress from Pennsylvania

    McGovern, Hon. James P., a Representative in Congress from Massachusetts

    Pages, Dr. Erik R., Ph.D., Vice President of Policy and Programs, Business Executives for National Security

    Thomas, John P., Director, Weldon Cooper Center for Public Service at the University of Virginia, and Fellow National Academy of Public Administration

    Young, Dr. April, Ph.D., Executive Director, Potomac Way Project, President, National Council for Urban Economic Development


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    Kanjorski, Hon. Paul E., of Pennsylvania

    McGovern, Hon. James P., of Massachusetts

    Shuster, Hon. Bud, of Pennsylvania


    Burchell, Dr. Robert W

    Cavender, Richard A

    Ching, Franklin G

    Pages, Dr. Erik R

    Thomas, John P

    Young, Dr. April L


Burchell, Dr. Robert W., Ph.D., Rutgers University, Center for Urban Policy Research, EDA Public Works Performance Evaluation, charts:
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Methodology November 1996–May 1997



Ching, Franklin G., Town Representative Natick, MA, and President, National Association of Regional Councils, on behalf of the Coalition for Economic Development, report, Reinvigorationg America for the 1990s: A Regionally-Oriented National Economic Development Policy, by Mark C. Newton

Pages, Dr. Erik R., Ph.D., Vice President of Policy and Programs, Business Executives for National Security, response to question from Rep. Traficant concerning Funding for Pilot Programs for Investment in Distressed Areas


    Koos, Philip, Jr., President, Public Works and Economic Development Association, statement

    National Governors Association, letter, July 3, 1997


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U.S. House of Representatives,

Subcommittee on Public Buildings and Economic Development,

Committee on Transportation and Infrastructure,

Washington, DC.

    The subcommittee met, pursuant to notice, at 9:00 a.m. in room 2253, Rayburn House Office Building, Hon. Jay Kim (chairman of the subcommittee) presiding.

    Mr. KIM. Good morning. Good morning, everybody. Today is the first of 2 days of hearings on the reauthorization of the programs of the EDA and Appalachian Regional Commission.

    In today's hearing we'll hear from the assistant secretary for economic development at the Department of Commerce, Dr. Phil Singerman; Federal co-chairman of the Appalachian Regional Commission, Dr. Jesse White; and The Honorable Cecil Underwood, Governor of the State of West Virginia, representing the 13 Appalachian States.

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    At the hearing scheduled for next Thursday, we'll hear from outside experts and groups.

    Earlier this year the Administration submitted reauthorization proposals for both the EDA and ARC. These bills were introduced by request by the bipartisan leadership of this committee. I congratulate the Administration for submitting draft legislation that in many ways is consistent with the recent legislation reported by this committee.

    The two bills, House Resolution 1429 and 1430, will form a good starting point for the committee's expeditious consideration of reauthorization legislation.

    I certainly look forward to the testimony of the witnesses today.

    At this time I yield to the ranking member of this subcommittee, Congressman Traficant, for any opening comments he may have.

    Mr. TRAFICANT. I want to thank you, Mr. Chairman, for holding this important hearing this morning to discuss reauthorization of these important programs for many communities like mine and many others throughout the country who are not experiencing the great resurgence that is bandied about so much in the press.

    I also want to welcome The Honorable Cecil Underwood, the fine governor of West Virginia that Bob Wise is so proud of—and we hail your accomplishments; and Jesse White, ARC; and Phil Singerman. From what I understand, Phil is moving from Philadelphia to Washington, D.C., so we're going to be bringing one of the fine Executive Branch employees and his program closer to us.
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    I want to thank Jesse and Phil personally for the things you've done for so many communities around the country.

    You know, for years EDA and ARC have been targeted for elimination. I think it's time to tell it like it is. These are programs we've had to take off the scrap heap a couple times, and I want to thank Bob Wise for the tremendous job that he has done in sitting in here in his position as a ranking member on a couple issues to fortify both the EDA and the ARC, and I pledge to continue to work with Bob to make that happen.

    But the fact that we now have what seems to be strong bipartisan support, as evidenced by the position taken by Chairman Kim, I think is very positive—very positive—and it gives an opportunity to go forward.

    So I am looking forward to the types of things that communities like mine can begin to leverage necessary funding for to advance some of their economic interests, and to use the limited dollars, although strategic dollars, of ARC and EDA to complement and to enhance some of the other things that they do in a strategic, innovative fashion. That's where we must go.

    And before I close I'd just like to say one thing. I would like both the EDA and ARC to look at a program that I have brought forward. It provides for a pool of money that could be used to buy down interest rates only. I believe one of the problems we've had as a Federal Government is for years we threw money at programs and projects and hoped for the best and tried to help people. Many times that didn't work.
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    The proposal that I have submitted calls for a fund of money to be created that could only be used to buy down interest rates once a bank finds a local project to be deserving. And when that local project is deserving, then the Feds come in and say, ''Look, if you're going to put your money into that project and you believe that they've crossed the T's and dotted the I's and they have a reasonable foundation for an expectation of success or successful opportunity, then we'll participate, and here's how we'll participate: you loan the money and we'll buy down the interest rate on it.'' I think it's a good program, one that I ask both of these programs to consider.

    I'm glad to see that our ranking member has come in. He's a horse on this issue, as well.

    With that, I thank you, Mr. Kim, for having the hearing and yield back my time.

    Mr. KIM. Thank you. At this time I'd like to recognize any other members who wish to make an opening statement.

    Ms. NORTON. Mr. Chairman?

    Mr. KIM. Ms. Norton, from Washington, D.C.

    Ms. NORTON. I simply want to welcome the governor and Mr. White and to indicate my strong support for the approach embodied in this reauthorization. This kind of planning and regional cooperation makes the best use of Federal dollars and should be imitated elsewhere.
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    Thank you very much, Mr. Chairman.

    Mr. KIM. Thank you.

    I'd like to recognize our full committee ranking member, Mr. Oberstar.

    Mr. OBERSTAR. Thank you very much, Mr. Chairman.

    I greatly appreciate the effort that you and Chairman Shuster have made to bring this legislation forward and the support of our ranking member on the subcommittee, Mr. Traficant, and our West Virginia delegation, who are always so arduous in their efforts to support the EDA and Appalachian Regional Commission.

    It was 32 years ago next month that I was privileged to be at the White House with President Johnson to observe the signing of the Public Works and Economic Development Act of 1965 and the Appalachian Regional Commission Organizational Act the same year. And this morning, before coming here for the hearing, I pulled out of my archives at home a green pen—one of the green pens that President Johnson used to sign that bill into law. It's a treasure. I don't keep it in my office, I keep it at home. I keep it as a reminder of a historic moment.

    EDA and ARC were a turning point for all of America in those dark years when, for most people in the south, living in the rural enclaves, a way up was a bus ticket north to Detroit or Cleveland or Chicago or Minnesota, when 80 acres and a mule characterized much of rural south, when throughout the 13 States of what we know today as Appalachia, the per capita income was 45 percent of the national average.
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    The goal was to lift that number, to lift the people out of poverty and toward hope and toward opportunity, and to do it by building the infrastructure of the region, creating tools for personal growth through vocational technical schools, health clinics, hospitals, and the individual training that was necessary, and to create an EDA, broader program, building on the success of the predecessor Area Redevelopment Administration that, in a 4-year experiment, had proved very successful, with a combination of investment in public works, loans to businesses to get started in those areas where there was little capital, if any, no risk-venture capital, no banks available to invest in local economic development initiatives, and in job training and research and development.

    Over its 30-some years of existence, the jobs created by EDA each year return more in tax dollars to Federal, State, and local governments than the Federal Government invested in the total program over its entire history. That's about $6.5 billion a year in tax revenue generated by the jobs created under EDA. Whole regions of the country have been lifted out of despair to growth and opportunity.

    Regrettably, however, in 15 years we have not had a reauthorization of EDA or of Appalachia. We have had year-to-year continuation by the Appropriations Committee in the funding for those programs to continue the agency.

    Time and again, this committee, on a bipartisan basis, full support from both sides, has brought legislation to the House floor which passed by votes of five- and six-to-one, including in the early Reagan years when President Reagan, in his economic message to Congress, mentioned only one Federal program of all those that he wanted to change, but only one in his remarks to the Congress and the American people, the Federal Economic Development Administration. Yet, when we brought a bill to the House floor later that year—Bill Clinger and I shall always remember bringing that bill to the House floor. It passed by a vote of 385 to some insignificant other number that I don't recall.
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    Mr. OBERSTAR. And again I hope, Mr. Chairman, that we'll bring out of this committee a bipartisan bill to the House floor, pass it by a substantial number, and bring this legislation to the President, who said he will sign it.

    Mr. KIM. Thank you. Thank you very much.
    [The prepared statement of Mr. Shuster follows:]

    [Insert here.]

    Mr. KIM. At this time I'd like to recognize the gentleman from West Virginia, Mr. Rahall, for opening statement.

    Mr. RAHALL. Thank you. I appreciate it. I have no opening statement. I'm not a member of the subcommittee. I appreciate the opportunity to sit here and welcome our witnesses.

    Mr. KIM. Thank you. We always recognize Members. It doesn't make any difference whether you're a member or not.


    Mr. RAHALL. I appreciate that. I want to offer support and welcome for our governor, and that will be officially done by my colleague, Representative Wise, but to show him on this side of the aisle, although not an official member of this side of the aisle, either, he does have support.
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    Mr. KIM. All right.

    The first panel will be Dr. Jesse White, co-chairman of ARC; and the Honorable Cecil Underwood, Governor of the State of West Virginia—I recognize Congressman Wise, the gentleman from West Virginia, for introduction of the Governor.

    Mr. WISE. I want to thank you very much, Mr. Chairman. I think it's a statement to you that even with a 9:00 a.m. hearing you filled the house, packed both behind me and in front of me.

    It is a great privilege to join with my colleague, Congressman Rahall, in welcoming Governor Cecil Underwood to this hearing. Governor Underwood is unique among those who have served in our State's chief executive office, having served as our State's youngest governor at the age of 34, and 40 years later as now our State's most senior governor.

    And he brings a wide range of experience to this testimony today because he has touched all the bases in his career, such as being a college president, a coal executive, vice president of a chemical company, and president of the Software Valley Foundation, which I'll talk about in just a second.

    Governor Underwood, when he was first governor, helped lay the foundation for West Virginia's interstate highway system, paving the way for economic development in our State. Certainly, that infrastructure has been crucial to our State's development and, of course, the Appalachian Regional Commission is directly involved in providing that infrastructure.
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    Governor Underwood, though, also understood earlier, ahead of a lot of other people, the importance of other types of infrastructure, particularly the infrastructure of technology, and now he is helping pave the way for West Virginia's technology superhighway system. He has been a constant advocate during his life of technology.

    I bring that up, Mr. Chairman, because, as you know, and Ranking Member Traficant, in the authorization bills that have left this subcommittee in past years dealing with the Appalachian Regional Commission, there has always been a strong recognition of the need for technology in the Appalachian region, and to encourage it, whether in the private sector or the public sector, and to encourage education, as well, recognizing that we need more than the infrastructure of simply concrete and steel.

    So I think Governor Underwood is an excellent person to be addressing us today. He knows well the Appalachian Regional Commission.

    I guess in many ways, Governor, you did it before, without the ARC. You're doing it with the ARC. You have worked with the ARC through your career in both the public and private sectors. And I think there is no one also better versed to talk about the public/private relationship and how the Appalachian Regional Commission affects that.

    So it gives me great pleasure to introduce the governor of West Virginia, Governor Cecil Underwood.

    Mr. KIM. Thank you, Mr. Wise.
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    Governor Underwood, would you like to begin first? Or Dr. White, you may start it first. Go ahead, please.


    Mr. WHITE. Thank you, Mr. Chairman.

    It is a privilege, as always, to appear before this committee, to be among so many old friends of the ARC; our West Virginia friends and supporters; the ranking member, Mr. Oberstar; Delegate Norton, who is such a strong spokesman for my hometown here in the District.

    I thank you for this opportunity to come and make a brief statement on behalf of the Administration's bill for reauthorization of the Appalachian Regional Commission.

    I'm particularly pleased to be here with Governor Underwood, whose presence I think says two things: one, as a Republican governor, the strong bipartisan support that this Commission has always had, both Congressionally and gubernatorially; and, second, the fact that Governor Underwood, among probably all the governors that I've worked with, has been an eyewitness to the history of Appalachia, having been governor before the Commission was created and now having seen the results of our 32 years of investment.

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    I'm obviously pleased to be representing the Administration, which for the first time in almost two decades is submitting a formal reauthorization request to the Congress.

    I think it is important that we be reauthorized so that we can take a longer-term and more-strategic view of our work. We're pleased that Congress has allowed us to operate on a year-to-year basis, but we think a 5-year reauthorization would allow us to do a longer-term planning horizon.

    The key highlights of the bill are probably known to you. It is a 5-year reauthorization of both our highway and our non-highway program. It closely tracks the bill that was marked up and unanimously approved by this committee in the 104th Congress. It also reflects our new strategic plan and it writes into the law the targeting provisions that the Commission has embraced internally for the last several years.

    As you know, the ARC is a very unique agency in Washington in the sense that we are a true Federal/State agency. The Commission consists of the Federal co-chairman and the 13 governors, and we each have half the votes on the Commission. I can't do anything without the governors, and they can't do anything without me, so it is really a joint policy-making model, which I think in many ways was 30 years ahead of its time.

    In addition to that, the actual project process is very much of a grounds-up process. We rely on our local development districts and our local governments to develop projects. They then come up to the governors' offices. The governors choose which one to fund. And then the Federal desk, my desk, is the last desk they come to, which is probably the way it should be. So it is very much of a bottoms-up model.
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    It has been very efficient. We only have about 3 percent of our appropriated money that has been used for overhead. There are only 60 of us here in the headquarters office, and much of our program is actually administered through our governors' offices.

    We completed about a year ago and unanimously adopted a new strategic plan. We actually began this process before the GPRA requirements as a way to celebrate the 30th anniversary of the Commission, and we did it in the ARC family. We didn't hire consultants to do it. It took about 18 months. We went out into the field. We held four interstate town meetings, a satellite town meeting with 50 downlinks, focus groups, consultations. We heard from over 2,000 citizens of Appalachia. We commissioned research. And we forged this into a new mission statement, a new vision, and the commitment of the ARC to five strategic goals.

    That plan was unanimously adopted by the governors and me in February of last year, and we are currently in the first year of full implementation of the plan, and in addition are developing the performance measures required by GPRA, as well.

    The language in the bill you will notice captures the mission statement and the strategic goals of this new plan.

    The authorization request reauthorizes both the highway program and the non-highway program, and I would like to say just a word about each of those.

    As most of you know, the highway program was put into place in 1965 because the interstates had bypassed the mountains. Congress found that a region apart, a region not connected into the transportation grid of this country, could not possibly prosper and participate in the American economy.
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    So Congress authorized a 3,025-mile highway system as an economic development highway system that would connect our communities to the transportation network of this country.

    I want to commend the Congress on its tremendous courage in sticking with that commitment, because it has been a special highway system for a special part of the country. It has been expensive, and I know it has been hard to muster the votes to support it, but you have done so.

    The system is now 78 percent complete, either open to traffic or under construction. We have approximately 670 miles of that system yet to be built.

    We are now completing the first formal estimate of the cost to complete that system that has been undertaken since 1992, working with the Federal Highway Administration. That estimate is going to reflect that the Federal share for finishing the system is going to be about $6.2 billion.

    The reason for the increased costs, of course, are that we are going through some of the toughest terrain now, inflation, routing changes and design changes that have occurred in the last 30 years as a result of more stringent environmental regulation and mitigation, and cost increases in the actual design of the highways, themselves.

    We will be submitting this formal cost estimate to the Congress when it is completed and formally adopted by the Commission in the next couple of weeks.
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    The reauthorization bill, therefore, requests $90 million in fiscal year 1998, and such sums as may be required after that. In addition, the committee should be aware that the President, for the first time in the history of the ARC, has submitted a proposal in the NEXTEA legislation that would fund our system out of the Highway Trust Fund—some $2.2 billion over the 5-year life of the fund that would complete about another 35 percent of the system.

    We are very pleased that the President has seen fit to do this, because you can see at about $100 million a year out of the general fund on a $6 billion tab it would be the end of the next century before this highway system was completed. All the time, the cost would be increasing. And so I think this represents a serious commitment for us to go ahead and finish the job of building these roads.

    The economic benefits of the highway system to Appalachia and beyond Appalachia are beyond doubt. Every study that has ever been commissioned shows a high correlation between job creation and the development of our corridors. We have done three such studies. We are in the process of finishing a fourth. And I think the economic benefits that have accrued from these roads shows the wisdom of Congress in 1965 and since to fund this highway system. It really is the backbone of the ARC program.

    We have spent about two-thirds of our money in the history of the ARC on our highways, but the other third has gone to what I call the ''handmaiden of economic development to highways,'' which is so important, and that is our area development work, our work on community and economic development, putting in place those elements of economic development in distressed communities that are so critical.
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    Congress has given the Commission wide latitude to work in a broad array of these activities. They are reflected in our five strategic goals in the new plan. One is an educated and trained work force. Two is a physical infrastructure, such as water and sewer and telecommunications. Third is leadership development and civic institutions. Fourth is dynamic, diversified local economies based on an entrepreneurial model of economic development. And the fifth is health care.

    So we are asking that the Congress also reauthorize our area development program in fiscal year 1998 at $71 million, and then such sums as required thereafter, so that we can continue to work on the economic and community development side of the economic development equation.

    I think we all know that highways are a necessary but not sufficient condition to economic development.

    Let me say a special word about the targeting that is going on at the Commission and for which we have received strong Congressional support. And, quite frankly, in my 25 years in government and economic development, I have never seen anything quite like this.

    We at the Commission have four categories of counties. We have 399 counties. We have distressed counties, we have competitive and attainment counties, and then transitional counties, which are in the middle.

    The distressed counties are those in which the unemployment and the poverty are at least 150 percent of the national average and where the per capita income is no more than two-thirds of the national average.
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    When ARC was founded in 1965, you would have found that most of our counties would have been distressed. When I took over in 1994, that number was down to 115. The Commission takes the non-highway money every year and takes a percentage off of the top to devote just for work in those distressed counties. The Commission votes to do this every year.

    What's really unique about this, Mr. Chairman, is that four of our States have no distressed counties, so they actually stand aside and vote to give up money to work on the neediest of the needy counties. It's really a remarkable vote. There has never been a negative vote against the special allocation.

    Last year we increased from 20 percent to 30 percent of the area allocation, the money that goes to work in the neediest counties in Appalachia. We call this an ''intensive care model of economic development.'' It concentrates resources on the areas that need it the most. And I'm proud to report to this committee that in the last 3 years we have reduced that number of counties from 115 to 94. We have been able to graduate out some 21 counties from distressed into the transitional category, so we think this model works.

    In addition, those counties that we call attainment counties, counties which have reached the national average, are not eligible to receive ARC money. We have 10 of those counties—except for highway money, of course, and our local development districts.

    We also have competitive counties that are near the national average, and they are eligible to receive only 30 ARC percent funding on projects.

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    The transitional counties in the middle normally receive up to 50 percent funding.

    So we have really been serious about trying to target the resources to those areas of greatest need and restrict Federal resources to those areas that have made it or that are doing well, and we're asking that Congress write this concept into the law in this reauthorization.

    Let me say one word about a new regional initiative that the Commission has launched that I am personally very excited about. In addition to just giving the money on an allocation basis to the States, every so often the Commission will identify a regional issue, something that transcends State boundaries that we need to work on together. We have done special work for the last 3 years in leadership, export trade, and telecommunications, and now we're launching a 3-year initiative in what we call ''creating entrepreneurial communities.'' We are going to devote $5 million a year for 3 years to try to move our States and communities to a new model of economic development or a new way of thinking about economic development, which is not so much the industrial recruitment model, where you try to bring a plan in or bring the jobs in, but we begin to think more in terms about putting in place the infrastructure that will enable our people to grow their own companies and grow their own firms and grow their own jobs at home.

    Home-grown companies have many advantages in our communities. They tend to stay put. They tend to reinvest more in the local community. The decisions are made locally, rather than in Tokyo or Seattle or New York. And, finally, they create true wealth in our local community, which is really the foundation for self-sustaining development.

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    We will keep the committee informed as we move along on that.

    The ARC model has clearly worked. Since we have been founded, the poverty rate in the region has been cut in half, the infant mortality rate has been cut by two-thirds, the percentage of adults with a high school education has doubled. We have brought clean water to some 700,000 households. We have put primary health care within 30 minutes of every Appalachian citizen by building some 300 health care clinics. We've helped build some 700 vocational and technical centers that now train about a half million people a year. Our revolving loan funds have created or retained about 35,000 jobs. And I mentioned this reduction in our distressed counties.

    And yet I want to point out, Mr. Chairman, that we don't think the job is yet done. In the words of a report that the Southern Growth Policies Board issued a few years ago, ''we're halfway home, but we still have a long way to go.''

    We have moved from a region of uniform distress to a region of contrast, in which some of our areas have done well but many have not.

    We still have 24 percent of our counties distressed, compared to 11 percent nationally, and many of those 267 counties that are in a transitional status still need our support so that they don't slide back.

    The primary focus of our problems, of course, remains in central Appalachia—West Virginia, eastern Kentucky, southern Ohio, southwestern Virginia—where we still have severe problems of under-development, and so we think that we need to get serious about going ahead and completing our job.
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    We are very well aware that Congress never intended for the ARC to be a permanent fixture in the Federal Government, and we have been working very seriously on a plan that will move us to the day when we can come to Congress and say our job is done. We think that will be when our highway system is finished and when the landscape of Appalachia looks pretty much like the landscape of the rest of America—pockets of distress, an occasional distressed county, but no longer these massive concentrations of distress that we have seen in the past.

    We think with the 5-year reauthorization it will be a strong signal to the American people that we are serious about going ahead and finishing our job.

    Thank you very much.

    Mr. KIM. Thank you.

    At this time I recognize Mr. Traficant.

    Mr. TRAFICANT. Mr. Chairman, I ask unanimous consent that all of the questions that I have written for each respective panel, that they be submitted in writing and that they be answered in a timely fashion that's consistent with their ability to do so and be spread across the record.

    Mr. KIM. Without objection.

    Governor Underwood?
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    Gov. UNDERWOOD. Thank you, Chairman Kim, Ranking Member Mr. Traficant, neighbor, other members of the committee. I am especially honored to be here today and personally honored that two of my long-time friends and associates, Congressman Wise and Congressman Rahall, are here today. We have worked together, I from the private sector, they as strong representatives from two of our Congressional Districts, on many important problems in the State.

    I am especially interested in the Appalachian Regional Commission because I have seen it grow from its birth to where it is now.

    In 1958, with a lot of plans for the future of my State, the coal industry took its giant stride to full mechanization, and in 1 year's time 25 percent of our work force was displaced. That's when we began to export our people to neighboring States for job opportunities.

    In August 1959, three governors met in Annapolis, Maryland—Governor Burt Combs of Kentucky, who was in the last year of his term as governor; Millard Tawes, who had just been elected governor of Maryland; and myself. And we met informally to talk about how we could collectively deal and begin seriously to face this kind of economic shock and displacement.

    From that initial meeting we expanded into other States of the Appalachian area, and several meetings were held during the remainder of 1959 and 1960. And then, as you know, President Kennedy appointed an Appalachian Study Commission chaired by Franklin D. Roosevelt, Jr., and the ultimate culmination was the creation of the Appalachian Regional Commission in 1965.

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    Now, after 40 years, coming back to the political scene, I see the tremendous progress that has been made in my State. Every county of my State is a part of the Appalachian Regional Commission. We are moving rapidly forward. Our new job announcements the first 6 months of 1997 are 40 percent greater than the same period last year, and, Dr. White, 60 percent of the new jobs that we have announced this year represent expansions of business and industry already there.

    This is directly in response to the investment we've made in the very things that ARC emphasizes, and the ARC approach is consistent and parallels four of the five focus areas that I have announced for my administration: technology, economic development, education, health care. My fifth one is government structure. And, of course, all of these have an important bearing on what the government structure could be.

    So I am pleased to be here on behalf of the 13 Appalachian governors and the 21 million people of Appalachia.

    It has been already stated this morning, and I certainly want to emphasize the significant difference that this program has made to the citizens of all of these Appalachian regional States.

    I want to express my gratitude to the co-chairman, Dr. White, whom I just met since becoming governor this year, for his strong leadership and the excellent stewardship that he brings to the management of the program. He has made great progress in his short 3 years of time.

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    He has outlined to you the key elements of H.R. 1429. Let me say simply that my fellow governors and I from the 13 Appalachian States, Republicans and Democrats, alike, unanimously support this bill and urge its rapid enactment into law.

    I have mentioned the great economic shock that we experienced in 1958. Conditions then even before the shock were serious. It was a stark situation, a part of our country. The valleys are narrow, the mountains are steep, and flooding was a constant menace. Poverty and the boom and bust cycle of an extracted economy were norms for the time. And no matter how good the times might be at a particular moment, the people lived in perpetual dread that wrenching poverty was just a tomorrow away.

    Running water was a luxury in most of the mountains. Adequate health care was available to very few people. High school dropout rate exceeded 50 percent in most of the mountain areas.

    Travel was difficult everywhere in the region. In most counties, four-lane roads were nonexistent, and two-lane roads wound precariously around mountains up and down through the hills and the hollows. People were isolated from the outside world, and isolated from each other by topography.

    The coming of the modern highway system has changed all of that, and now, with our electronic infrastructure in place, we have a proximity that we've never enjoyed before. A 20-mile trip used to take an hour. Now, with the modern highways, it's there with much greater safety, much less time, and much ease of travel.

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    I've already mentioned the origin of the ARC.

    Today Appalachia, rather than being a region of despair, is a dynamic region of contrast, populated now with people who have hopes, who have dreams, and who feel a part of the rest of the world. Poverty, as Dr. White has indicated, is still with us, but it's a fraction of what it was before ARC came to the scene. Our economy is rapidly diversifying, taking away with it the boom and bust cycle that had been a constant companion for so long, and it leaves in its place a level of employment stability that the region has never known before.

    We are growing not only in numbers, but in diversity, and technology offers us the tool for the continuation and completion of the diverse economy we need.

    Infrastructure is very important. Our State of West Virginia passed a bond amendment in 1994 to provide matching funds for grants from ARC and other programs, and providing water and sewer service is now a major goal of the State of West Virginia, and water becomes an important adjunct to our growth.

    We are taking advantage of the rural clinics that have been established, and using MDTV, electronic networking, to link our medical centers with rural hospitals, community clinics, and we are reaching people who never could be reached in the past. This wouldn't have happened without the seed money planted by ARC.

    In our State, alone, ARC has invested more than $260 million in community development projects. This investment of $260 million has yielded a total investment of more than a billion dollars, with more than 35 percent of these funds coming from State and local sources.
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    We have invested in health care, child care, education, water and sewer systems, and housing. Additionally, ARC has invested nearly $1 billion in highway construction in our State, alone, and more than $4 billion in the region. As a result, isolation has been replaced by highways of opportunity, despair has been replaced by hope, limited horizons have been replaced by limitless dreams and aspirations.

    ARC has really been our lifeline, our source of hope, our boot strap that we could help ourselves to become a region of opportunity. And I think it has been a boot strap because of its unique structure, which enables the governors to be full and equal partners with Federal officials. I think, as already indicated, it is a model of cooperation between the Federal Government and the State government, and I know in our State it has been responsible for motivating a great deal more local effort than otherwise would have been possible and would have happened.

    I want to emphasize as strongly as I can the importance of the direction your committee has taken for the reauthorization of House bill 1429 to help us see a light at the end of the tunnel. It's a thoughtful bill. It streamlines Commission operations, encourages us to focus more attention on the remaining severely-stressed portion of the region. It's a focus we welcome and embrace. As Dr. White has noted, it simply codifies actions which have already been taken.

    I would point out that these actions have been taken voluntarily, with the strong support of the governors, because as governors we know in the region that we are all in the region together and we have to work together, because what benefits one part of the region benefits all of the region. And we feel very strongly about the partnership. That's one thing that I've noticed with real pride and sense of appreciation is this cooperation between the States. It's a much higher level now than it was 40 years ago.
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    Mr. Chairman, your wisdom and the collective wisdom of your colleagues on the committee, as well as your predecessors, has created a new Appalachia in many parts of our region, an Appalachia of hope and vision, bustling towns, growing communities, safer highways, cleaner environment, bright-eyed children, and hopeful adults.

    I speak for all the governors and all the people of the region to express our gratitude to you and our pledge that we will move expeditiously to complete the job.

    Finally, Mr. Chairman, I understand that this subcommittee is also considering legislation to reauthorize the Economic Development Administration. Throughout the States of Appalachia, EDA historically has been a vital partner with State and local governments to promote community development and to create job opportunities.

    In many cases over the years, the EDA and ARC have teamed together with community leaders and elected officials to develop projects that have been critical to our communities. I appreciate this chance to speak on behalf of my fellow governors and to express our appreciation for the leadership and the vision that you have demonstrated.

    Mr. KIM. Thank you, Mr. Governor. Thank you very much.

    At this time I'd like to recognize Mr. Tom Davis, the gentlemen from Virginia. Would you like to make any opening comments?

    Mr. DAVIS. Just very briefly.
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    I am just very intrigued to have Governor Underwood here, who has really been there before and after, a 40-year hiatus between his election in 1956 and 1996. And I'm also pleased to see that you're putting technology as one of your priorities as you look at economic development.

    The world is changing. The old ways of doing things from an industrial age are kind of yielding to a new information-based economy. And the challenge to us is that the have's and have-not's, that that gap doesn't widen but that we can somehow use this to bring it closer together.

    It would just be my judgment that we need to start leveraging the university communities, the academic communities. With the growth of the Internet, you don't have to be near the customer any more. And I'd be really eager to see States like my State of Virginia in the rural areas and West Virginia and others looking ahead and forward, looking to see how they can use these new technologies—growth of the Internet, satellites—use the wiring, when they talk about infrastructure, not just the traditional roads and sewer and water, although those are basic to doing anything. I think otherwise technology is going to overtake all of us in the economic strategies. We need to think outside the box.

    I was pleased to see, Governor, in your opening statement, that you're looking at some of these things in a forward way.

    I thank you very much.

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    Mr. KIM. Thank you.

    At this time I'd like to ask any Members who wish to ask any questions.

    [No response.]

    Mr. KIM. Then I have a couple of questions.

    Mr. RAHALL. Mr. Chairman, I don't have any questions. I just want to commend Governor Underwood and Dr. White for their appearance here today, and also the presence of Mike Wenger, who is very much our main contact with ARC through the difficult times and years. We're real glad that Mike is here.

    Mr. KIM. Thank you, Mr. Rahall.

    I'd like to ask a couple of questions to Dr. White.

    I think ARC is one fine program and very successful program, and thank you for your fine job. But I do have one serious concern. ARC has been around since 1965. It was supposed to be completed in 1982, which is about 17 years. Since then, we have been appropriating on an annual basis. As of today, you have been existing 32 years, yet keep saying that this is not a permanent fixture. Thirty-two years seems to me it is permanent fixture. I don't see how that couldn't be a temporary fixture now.

    I'm from California. According to figures I have, California has contributed more than $650 million on this region, which is fine. We believe that this program is unique, it's necessary. We like to help fellow Americans. But I'd like to see some kind of phase-out program. How long more? Twenty more years? Ten more years? What is it?
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    I would like you to go back and come back with a program that when it's going to be finished. Are you telling me that 78 percent has been completed out of 3,025 miles? I did a little quick mathematics. Then you should be able to complete the whole job in less than 9 years.

    But looking at this mathematics, I think any way you can come back and tell us, maybe next couple of weeks, when this program will be terminated. Twenty years? Ten years? That's my first question.

    The second concern I have is you mentioning that Mr. Clinton proposed, under this NEXTEA program, to use Highway Trust Fund money, average $200 million a year. Are you looking at that as an additional funding or $200 million from trust fund in lieu of general fund money you're getting? Are you looking at this Highway Trust Fund money as additional funding?

    Mr. WHITE. According to the President's out-year projections in the budget, only fiscal year 1998 would have general fund money of $90 million, plus $200 million from the trust fund. And in the Administration's projections thereafter, it would only be trust fund money, although the money would be under the control of the ARC in terms of allocating it to the States and to the roads and so forth.

    Mr. KIM. Now, if that's the way Mr. Clinton's budget proposal is, the first year combined together and from second year nothing but Highway Trust Fund money, alone, if that's the case, you will have more money first year, so obviously you'll be able to do more, and the completion date should be even shorter than that. Instead of 9 years, perhaps you can finish the whole thing maybe within 7 years.
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    But you know that once you've taken ISTEA money it will have a different criteria in ISTEA. I don't see how we can make an exception. I don't know if you can really use non-highway programs as you have done in the past using ISTEA, which has some constraints. Are you aware of that?

    Mr. WHITE. You mean our non-highway program work, area development?

    Mr. KIM. You may have some problem using ISTEA money——

    Mr. WHITE. That would still have to be appropriated out of the energy and water account.

    Mr. KIM. From general fund money?

    Mr. WHITE. That would be from the general fund. That's correct.

    Mr. KIM. So you're looking at continued on this program, kind of funding from both general fund and Highway Trust Fund?

    Mr. WHITE. There would be no area development work done out of the Highway Trust Fund money. That would be strictly for roads.
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    Mr. KIM. So you're looking at both funding continually?

    Mr. WHITE. Correct.

    Mr. KIM. And tell us how long and how much you're looking at this in general fund and Highway Trust Fund, and when this program will be terminated. Everything has to have terminated some place. It can't be just perpetual.

    Mr. WHITE. Well, we estimate that if the Congress were to enact the NEXTEA proposal and fund out of the trust fund at that level, it would take about 20 years to finish the highway system.

    Mr. KIM. Then you've only got 22 percent to complete, why would it take another 20 more years?

    Mr. WHITE. Well, the cost to complete estimate is $6.2 billion of Federal money, and this is done according to Federal Highway Administration standard costing procedures, working with our States.

    I think it is well to remember that even though there is only a quarter of it left to be built, we're going through some of the toughest terrains. It's a lot more expensive now than it was to build the roads 10, 15, or 20 years ago, so the price tag goes up. And the longer we wait, the more expensive it gets.

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    Mr. KIM. But, Dr. White, your statement indicated that interstate highway has been completed more than 98 percent.

    Mr. WHITE. Pardon? No.

    Mr. KIM. Interstate highway has been completed almost 98 percent, and only other non-interstate highway has been completed up to 78 percent. Why would it take another 20 more years? It seems like quite a bit. I'm puzzling why it takes another 20 more. Even around 32 years, adding 20 more years, that's 52 years to complete this project.

    Mr. WHITE. That's what we're saying. That's just running the numbers.

    Mr. KIM. Well, I mean, that's the way it is, that's the way it is. I'm just asking questions. Is that——

    Mr. WHITE. That's correct.

    Mr. KIM. All right. Are there any other questions?

    [No response.]

    Mr. KIM. Well, thank you very much. And can you give us some kind of program that——

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    Mr. WHITE. Absolutely.

    Mr. KIM.——explains the 20 more years?

    Mr. WHITE. I'd be pleased to.

    Mr. KIM. Thank you.

    [The information received follows:]

    [Insert here.]

    Mr. KIM. Thank you very much, Governor Underwood and Dr. White.

    Our next witness will be Dr. Phillip Singerman, Assistant Secretary of EDA. Please come forward.

    Dr. Phil Singerman, welcome.

    Mr. SINGERMAN. Thank you, sir.

    Mr. KIM. If you're ready, you can go ahead and proceed, please.

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    Dr. SINGERMAN. Mr. Chairman, distinguished Members, ladies and gentlemen, I'm honored to appear before the Subcommittee on Public Buildings and Economic Development to testify on behalf of the reauthorization of the Economic Development Administration.

    First, Mr. Chairman, I would like to express my appreciation to you for the many courtesies that you, the other Members, and the staff of the subcommittee and committee have extended to me and my staff over the past 2 years, and to acknowledge gratefully the support that the senior leadership and members of this committee have afforded EDA.

    I'd also like to acknowledge the presentation of my colleague, Jesse White, and Governor Cecil Underwood, and to also express support for the reauthorization of the Appalachian Regional Commission.

    My remarks this morning summarize a longer written statement, which you have, and I request that that be made a part of the hearing record.

    I would like to start my formal presentation by reading a letter addressed to you by Commerce Secretary William Daley.

    ''The Honorable Jay Kim, chairman, Public Buildings and Economic Development Subcommittee. Dear Mr. Chairman: On March 31, 1997, I submitted for your committee's consideration 5-year reauthorization legislation for the Economic Development Administration. The Economic Development Partnership Act of 1997 retains a number of provisions in legislation considered by your committee during the last session of Congress and proposes changes or revisions that complement management initiatives and enhance the efficiency and effectiveness of EDA.
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    ''Thank you for introducing the Administration's bill on request and your scheduling of a hearing today.

    ''Dr. Phillip Singerman, assistant secretary of Commerce for Economic Development, is prepared to discuss the Administration's proposal and respond to your questions.

    ''I also appreciate the bipartisan support that you and your colleagues have afforded EDA and look forward to working closely with you to move this bill through the legislative process.

    ''Sincerely, William M. Daley, Secretary of Commerce.''

    Mr. Chairman, my remarks will be very brief this morning so there will be ample opportunity for us to listen to you about your concerns about this agency.

    First let me highlight briefly the current status of the Economic Development Administration. And I would like to make four points.

    First, EDA has a special mission: assisting distressed areas of the Nation to generate economic activity that attracts successful private sector investment and creates permanent quality jobs. We carry out this mission in an unusually effective way: by responding to locally-identified community needs with an array of flexible programs.

    This Federal role was recognized in a report issued last November by the nonpartisan National Academy of Public Administration. I understand that you've invited NAPA to testify next week at your hearing and you'll hear a fuller exposition of this report.
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    Second, EDA's programs are demonstrated to be highly effective. A prestigious consortia of research institutions headed by Rutgers University Center for Urban Policy Research, which specializes in transportation infrastructure studies, recently completed a comprehensive review of EDA's public works program. This report I understand, too, will be presented to your committee next week.

    Third, EDA focuses its resources on the most-distressed communities. Last year, Chairman Rogers, during the Commerce appropriation hearing, asked if we would follow the criteria that your committee outlined in legislation that you considered last year. I'm pleased to report that we have. Over 93 percent of all of our public works projects last year met the criteria of high unemployment and low per capita income, and the remaining 7 percent were in communities of only slightly less distress, including growth center areas.

    Fourth, over the last 2 years—and I know you'll be pleased to hear this, Mr. Chairman—EDA has become a much more efficient agency. We have reduced our staff by 30 percent. We have reduced the number of political appointees at EDA by 60 percent. And last year, alone, we reduced the number of headquarters personnel by 25 percent.

    In sum, EDA has put its house in order and answered the questions that members of this committee and the Congress have raised in the past. Reauthorization of EDA is the next step in this process of reinvigorating the agency. The Administration has proposed a comprehensive, 5-year reauthorization of the EDA, intended to provide stability to this program that is so important to America's distressed communities.

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    The Partnership Act preserves EDA's basic authorities and procedures that have demonstrated their value over the years—for example, public works and infrastructure, local planning, and economic adjustment.

    The Partnership Act assures that EDA's resources address the needs of the Nation's most distressed communities by adopting the approach outlined in this committee's prior legislation, determining eligibility at the time of application based on clearly-defined economic distress criteria.

    The Partnership Act also reduces the administrative burden and provides greater flexibility to local communities, for example, allowing self-certification by applicants and allowing project savings to be used for project enhancements.

    In addition, EDA has also included a number of provisions in the legislation that maintain and build upon valuable existing activities. For example, we continue to prohibit assistance that would create excess capacity in a given industry or that would allow for relocation of jobs from one area to another.

    We are also encouraging greater cooperation between the States and the Federal Government.

    In sum, the Economic Development Partnership Act of 1997 constitutes a careful update of EDA's authorizing legislation. The Partnership Act streamlines our authorities, establishes consistency among programs, and preserves the most effective assistance activities.

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    Mr. Chairman, EDA has transformed itself and is now positioned to more effectively assist the Nation's distressed communities. Reauthorization is a critical step in our ability to promote economic growth and job creation. We look forward to closely working with your committee to fashion legislation that can take this agency into the 21st century.

    Again, I appreciate the opportunity to appear before this committee and look forward to answering any questions that you may have.

    Mr. KIM. Do any Members wish to ask any questions at this time?

    Mr. COOKSEY. Thank you, Mr. Chairman.

    I'm intrigued by the fact that you've made these reductions in your agency. The reduced political appointees by 60 percent, that sounds like a move in the right direction, and other efficiencies.

    What prompted you to do it at this time and why hadn't your agency done it sooner?

    Dr. SINGERMAN. The reduction in staff flows from two sources. It was a goal of the national performance review and of the Administration, in general, to reduce the number of Federal employees, so that has been a goal of the Administration since 1992. And we had a glide path that would reduce the number of employees in the agency over the succeeding 4 to 8 years.
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    I would say that this activity was sped along by the reduction in the budget that was provided to us for fiscal year 1996. It was a very significant budget reduction from fiscal year 1995 to fiscal year 1996 in our salaries and expense line, and in order to accommodate the—to live within our means, we had to take very drastic steps in order to not only downsize our agency but reduce expenditures in every category that we could find. And so those were the precipitating factors that caused it to happen at this time.

    Mr. COOKSEY. Good.

    You know, I'm a freshman Congressman. I've been out in the private sector. I am convinced very strongly and I'm bringing a message that all of Government needs to continue to downsize. The reason we are in such a good economic period right now is because industry, businesses in the 1980s downsized, re-engineered. We're not in this economic expansion because of the White House or because of the Republican Congress. Probably we're there in spite of it.

    I have a firm conviction that politicians do more damage to the economy than they do good, and now I am one of them, but I hope we can change that. But I hope your agency will remember that.

    Two big reasons we are in an economic expansion right now is because American industry trimmed down to be able to compete in the world market and was forced to do it in the 1980s. Number two, we lead the world in information age technology, and we are in the information age. There is no place in Europe, there is probably no place in Asia that has information technology that we have, and it's paying off, and it's paying off in multiples.
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    Anyway, I'm glad that your agency is moving in the right direction. And I am telling you that the voices from out there in those taxpayers that are paying all of our salaries, they want you to keep on moving in that direction.

    Dr. SINGERMAN. Thank you, sir.

    Mr. KIM. I have a couple of questions, myself.

    Looking at this operation mode between EDA and ARC, I know ARC is a very good operation. I have reviewed their books and it looks like they are doing a very good job operation-wise. Your overhead costs actually have gone up from 1997 to 1998, even though amount of money is less compared to ARC.

    For example, your overhead cost has gone up from $28 million to $24 million from 1997 to 1998. Looking at ARC, their total management cost actually less, look at the dollar-per-dollar.

    Now, I know you did a good job downsizing, but kind of wonders why you got more overhead cost managing less money. That's my first question. And maybe I should go one-by-one. Would you answer that for me?

    Dr. SINGERMAN. Let me make a few points in preliminary response, and then, if that's not adequate, we'd be glad to provide a fuller response.

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    In order to understand, the agency has a broader area of responsibility than at first appearance. I mean, one naturally looks at the appropriation that we receive each year and then compares that to the salaries and expense line and comes up with percentages. But what that fails to take into account is that the agency also has responsibility for the prior investments that it has made over the years. It has an ongoing fiduciary responsibility for the billions of dollars of grants that it has provided to local communities in which there is still a Federal interest, and the agency is responsible for that ongoing Federal interest.

    In addition, there is a subset of that which are grants that we have provided over the last 5 years that are to communities for projects that are still unfolding. The funds have not been fully disbursed, project construction activity is ongoing. And that represents at any one time something close to 1,500 projects and close to a billion dollars of activity.

    So the responsibilities of the agency are not just the current awards that it is making, but all of the previous awards that have been disbursed—that have been awarded and not disbursed, and then an even larger tail of projects for which there is a responsibility.

    Mr. KIM. My second question is: looking at the history, EDA has been each time a kind of controversial bill to survive. Consistently more than 100 Members of Congress voted to eliminate EDA. Now, can you tell me why? Why Congress keep voting on each year trying to eliminate EDA? Is it something you have done wrong? Why is it not that popular among the Congress?

    Mr. SINGERMAN. It would be presumptuous of me, I think, to try to interpret the reasoning behind the actions of those Members. I will say that there have, over the years, been criticisms of the EDA which have been, at various times, appropriate. What I tried to outline in my statement was that we have, with the guidance of your committee, tried to address all of the issues that Members over the years have put forward.
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    For example, we have worked very closely with the inspector general in the Commerce Department to address many of the management issues and financial issues that he had identified, and I'm pleased to say that he has publicly commended us with the improvement in our financial management.

    So I think that the steps that we've taken administratively, and now the steps that we are proposing in the reauthorization will really put to rest many of the concerns that Members of Congress have raised over the years.

    Mr. KIM. Another concern I have is, according to the present program, almost 85 percent of the country is qualified, and that's—I don't think 85 percent are depressed areas, so something is wrong here.

    Now, is there any way you can change the system, instead of region-by-region basis, maybe looking at a poverty pocket area? If you are not in the region, then it doesn't make a difference whether they are depressed or not, they are not qualified.

    Maybe we should look at this policy one more time and reevaluate it and come back with perhaps a new policy.

    Mr. SINGERMAN. Okay.

    Mr. KIM. Get rid of this regional cost. I mean, if 85 percent are qualified, I don't believe America is that bad, 85 percent are depressed. I just don't believe that.
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    Mr. SINGERMAN. May I make two quick comments, and then we'd be glad to give you a more extensive response.

    The legislation that we have proposed would address the first question or concern that you raised, the 85 percent. Under the new legislation, the explicit criteria that your committee proposed last year and we have adopted in our proposal would reduce the population of the United States that is in distressed communities to about a third, which I think is about right.

    In regard to your second point, pockets of poverty—that is, poor communities within more affluent regions——

    Mr. KIM. Regardless region. Yes.

    Mr. SINGERMAN. That's correct. We have the flexibility within the agency's legislation currently and proposed——

    Mr. KIM. Okay.

    Mr. SINGERMAN.——to have special impact areas that address this very concern.

    Mr. KIM. All right. Good.

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    Finally, I'd like to see more innovative financing method instead of cash-by-cash basis. Is there any way that some local government can use EDA grant as a down payment or loan guarantee program so they can go to a conventional bank, borrow the money, and finish the job, and then make monthly installment by EDA grant, instead of waiting for the cash being accumulated? Can you be more flexible like that?

    Mr. SINGERMAN. We're currently soliciting a proposal for a research project that addresses precisely this issue that you've raised, looking at innovative ways of financing a public works infrastructure, and so I think that that study will come up with sound private sector experiences that we can begin to apply in our programs.

    Mr. KIM. When would the study be available for us?

    Mr. SINGERMAN. We're in the process of reviewing proposals, and I believe the study will be available, if I'm not mistaken, in the late fall or in the early part of next year in the winter.

    Mr. KIM. Okay. I don't have any other questions, really. Does anyone else have more questions? Dr. Cooksey?

    Mr. COOKSEY. Question and a comment. You know, I think that a lot of Members of Congress come here and they say, ''I have one of the poorest Districts or areas in the country,'' and I do have an area over in the northeast part of Louisiana, and we have one community, East Carroll Parish, which is right on the river and just has a terrible track record of bad politics. The sheriff is currently in jail.
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    Mr. COOKSEY. And the past two chiefs of police are—one is in jail and one has, I think, just been released. You know, they just don't seem to know how to handle resources. And they go in there looking for these grants, and then once they get grants they misuse them.

    I went in there a couple of times during my campaign, but it was just not my natural base. But I really want to help those people.

    I'm a physician and I've spent time doing mission work in East Africa, and I felt like I was more effective in East Africa. The people there wanted to help themselves, and you've got to help themselves more than these people in this part of Louisiana, which is a part of the United States, in spite of what rumors go around.

    My question—I have the feeling a lot of times—first, you're only asking for $319 million, or something in that range, for fiscal year 1998. You cannot build buildings. You can't do much in terms of bricks and mortar with that amount of money.

    There are a lot of rural communities like the one I alluded to that don't know how to put together a grant application. Once they get it, they oftentimes misuse it.

    Incidentally, I had a meeting scheduled with the police jurors, which in Louisiana is equivalent of a county commissioner, last Thursday night, and they canceled the meeting at 4:30 for lord knows what reason.
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    But it seems to me that you could better utilize this $300 million if you would go into these areas that have problems and show them how to put together a grant application and then make sure they utilize it properly.

    I want to do—I personally have gone into this, myself, and yet I don't have the expertise that you have. Some of my staff does. But has your agency ever considered using your rather meager resources in this direction—grantsmanship—instead of what you're doing?

    Mr. SINGERMAN. As a matter of fact, that is precisely how the agency works. We don't sit back and send out proposals in the mail—applications in the mail and then say, ''Submit them,'' and then sit around a table and decide yes, no, yes, no.

    We work with particularly distressed rural communities from the very beginning of the project's process, and we do this through our own staff. We have an economic development representative in the State of Louisiana whose mission it is to work with the most distressed communities to help them put together a project, identify funding sources—not just from EDA but from other agencies—and develop the package that we then fund.

    So it's not the kind of arm's length proposal process that you may be familiar with with other agencies.

    We also rely heavily on a local planning process, which is a very critical building block of our program. There are 320 planning districts around the country that we fund on an ongoing basis precisely to provide this kind of technical assistance to local communities.
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    I don't happen to know if there is one in that area. I apologize. But we can certainly find that out. I would be surprised if there weren't. And, working with them and with our local staff person, we can do exactly what you would like us to do and work closely with you and your staff on that.

    Mr. COOKSEY. Well, I hate to make a personal request in front of this group, but this is a parish that comes to the top of all the charts. And I've had groups that come to my office and say, ''Gee, this parish need help.'' It just happens to be the home parish of Congressman William Jefferson, who is a good friend of mine, and he has an interest in the parish, too. I think his mother may still live there.

    But it would be a model parish that is, if you could take it from where they are now, to where I think they have the potential to be, it would be a great thing and it would demonstrate that your agency really can do things. And next year when I'm here I would be very happy to see you in front of this committee if you could help us. It's East Carroll Parish, Lake Providence, Louisiana. I want to help them.

    They supported the wrong candidate for Congress, but I want to help them, anyway.


    Mr. KIM. Thank you.

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    Mr. COOKSEY. Thank you, Mr. Chairman.

    Mr. KIM. I don't have any further questions. I do like to make some statements.

    I, as a chairman of this subcommittee, no question would like to support EDA and ARC. I would like to—I need some cooperation. For example, if the same argument arises again during debate, I'd like to be able to respond, ''These were the concerns last year. Here is what we have done or will do.''

    In regards to the ARC, same thing. We'd like to lay out the program. It's not a permanent fixture. ''Here's a 20-year program. This is what we need, and it will be completed.''

    We need something like that. Otherwise, there will be another debate, another embarrassment. With your cooperation, I think we're in good shape to pursue this.

    Thank you, again, for participating this morning. I appreciate it very much.

    Any further questions?

    [No response.]

    Mr. KIM. No questions.
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    Then the subcommittee is adjourned.

    [Whereupon, at 10:20 a.m., the subcommittee was adjourned, to reconvene at the call of the Chair.]

    [Insert here.]



U.S. House of Representatives,

Subcommittee on Public Buildings and Economic Development,

Committee on Transportation and Infrastructure,

Washington, DC.

    The subcommittee met, pursuant to recess, at 9:00 a.m. in room 2253, Rayburn House Office Building, Hon. Jay Kim (chairman of the subcommittee)presiding.

    Mr. KIM. Good morning. The subcommittee will come to order this morning.
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    Today is the second day of 2 days of hearings on the reauthorization of EDA and the Appalachian Regional Commission. For today's hearing we'll hear from two distinguished Members of Congress, a panel of experts who have conducted studies of economic development, and from a range of outside witnesses representing communities, organizations that work with EDA and ARC.

    These witnesses will assist the committee in developing a hearing record to evaluate proposals to reauthorize the programs of the EDA and ARC. The committee looks forward to hearing the comments and suggestions of the witnesses today.

    I recognize the presence of our chairman—I mean our ranking member, Mr. Traficant.

    Mr. TRAFICANT. Thank you for the promotion.


    Mr. TRAFICANT. I accept it.

    Thank you for the hearing and for the continuation of looking into these two important programs. I would also like to thank for being here today, to begin with, the gentleman from Massachusetts, Mr. McGovern, and Mr. Kanjorski, a friend from Pennsylvania who will be here but who is tardy and absent without excuse at this point.

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    Mr. TRAFICANT. Let my friend from Pennsylvania know I said that.

    There are a couple things I wanted to mention before we go on here, Chairman. Despite the efforts over many years of many of the people here today, it has been 15 years since EDA and ARC were last authorized. We are the authorizing committee, and we have allowed an appropriation process to continue two programs that, in my opinion, will lack creativity and innovation without the authorization scope and process.

    Each year during this appropriation process someone offers an amendment to eliminate funding for these agencies. Fewer than 100 republicans voted for that, and hardly any democrats, and there has been over the years continuing efforts to support it. There has been some good that has been done. And certainly I know Chairman Kim has some questions, because he believes that every program could probably have a sunset time limit, and I'm sure he's looking at that.

    I would hope that maybe along with that, before we would ever sunset this program, we'd ensure that some of the goals that are met through the authorization process could be measured through reasonable outcome indicators, Chairman. So before we go ahead and set the sunset, I'm saying let the sun shine. I like that, sunshine. And let's reauthorize the program. Let's work with our administrators to use innovative programs to reauthorize and structure improvements.

    So with that I want to thank you, Mr. Kim, and pledge my continued support for you. And I know some of the reasonable questions you have. I'll try and work with you to solve them.
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    So with that, Mr. McGovern, and Mr. Kanjorski, who is absent without excuse, we'll look forward to seeing it.

    Mr. KIM. Thank you for that fine statement.

    At this time I'd like to recognize Mr. James McGovern, a member of the Transportation and Infrastructure Committee.
    [The prepared statement of Mr. Shuster follows:]

    [Insert here.]


    Mr. MCGOVERN. Thank you very much, Mr. Chairman, and Mr. Traficant, thank you very much.

    Mr. Chairman, I have a statement, and with your permission I would like to have it inserted in the record.

    Mr. KIM. Without objection.

    Mr. MCGOVERN. Okay. And I'll be brief here today.
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    I just want to thank you for allowing me to appear before you today and to bring to your attention an issue of great importance and concern to my constituents up in Massachusetts.

    I want you to know that I strongly endorse the public policy associated with the EDA. As you will see in my more-lengthy statement, I have emphasized a worthy project in Worcester, Massachusetts, the Community Health Care Center of Central Massachusetts, which is going to be designed to serve an under-served community of my city, and it's a project that will create many jobs, and it's a project that I think deserves support and a project that meets all the criteria for consideration by EDA.

    I want to say to this committee that I applaud your efforts to get this agency reauthorized, and I strongly support its reauthorization, and I should say as does the entire Massachusetts delegation, who feel very strongly that EDA has an important role to play in economic development.

    I don't want to take up any more of your time now, but I will be available to discuss this issue with your staff and you.

    Again, I thank you very much for allowing me to speak before you, and if you have any questions I'll be happy to answer them. If not, I'll work with your staffs as the weeks progress.

    Mr. KIM. All right. Mr. Traficant, do you have any questions?
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    Mr. TRAFICANT. No. I just want to compliment him, because most Members come in and say they're going to give an outline of their statement and they're not going to belabor us with all the time, and Mr. McGovern gets right to the point, and I want to let you know that that is appreciated.

    Mr. MCGOVERN. Thank you.

    Mr. TRAFICANT. We will look into those particular issues, and I think what is happening in health care up there in your District could serve to be a model for the country.

    Mr. MCGOVERN. Right.

    Mr. TRAFICANT. I'm sure that you have some fingerprints on that, because you've been pretty active.

    I just pledge to work with you and we'll help you.

    Mr. MCGOVERN. I appreciate it very much.

    Mr. KIM. I do have one small question for you. This community health care center in central Massachusetts, I understand EDA's participation was $2 million.

    Mr. MCGOVERN. That's correct.
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    Mr. KIM. Is that any local matching fund involved in this project?

    Mr. MCGOVERN. Yes. There is local matching funds, and I'll get you the figures.

    Mr. KIM. Do you know the percentage?

    Mr. MCGOVERN. I think it's an even match.

    Mr. KIM. Even match?

    Mr. MCGOVERN. Right. Fifty/fifty.

    Mr. KIM. Fifty/fifty?

    Mr. MCGOVERN. Right.

    Mr. KIM. I thought EDA money is supposed to be spent on infrastructure such as access roads, water and sewer systems. I didn't realize they're involved in buildings, even though it's a worthwhile project building an emergency room.

    Thank you very much.

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    Mr. MCGOVERN. Thank you very much.

    Mr. KIM. Welcome, Mr. Kanjorski. Go ahead, please.

    Mr. KANJORSKI. Thank you very much, Mr. Chairman. I appreciate the opportunity to testify.

    I wanted to say that over the 13 years of my service in the Congress of the United States, and some 17 years prior to that as practicing law in northeastern Pennsylvania, I had the occasion to work very closely with the EDA, and I can't think of a more focused, less bureaucratic agency of the United States Government in dealing with the lowest level of public officials.

    In the last 5 years, I can show you the benefits that the community can derive from EDA funding, both in Nanticoke City, my home town—as a result of a $1.8 million grant, a new structure was built for a back office operation which now employs more than 300 vital citizens of the community, when over the last 30 years there was a drain of employment in the community. Likewise, in the city of Hazelton, through a stimulation grant from the EDA of $600,000, 300 new jobs have been created in the downtown of that city.

    So this is a very forward-looking type of program that can give the impetus to put a package together and finalize that package, and it has streamlined conditions. Of course, we can always work to improve those conditions and we can always certainly work to improve the funding.

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    Mr. Chairman, I also chaired the Subcommittee on Economic Growth in the 103rd Congress, and I have noted recently, through a strong support of using EDA's tool of not only direct grants but also loan guarantees, and I happen to be a supporter of that effort.

    I brought along a report of our Economic Development Reauthorization Act of 1994, which covers a great portion of that, and I would refer to the chairman's use. Anything I can be supportive along that line, I do believe, as you, that loan guarantees can expand the amount of money and provide great leverage in the private sector, particularly in those targeted areas of our community, perhaps the under-served third of our communities in the country that should be targeted and provide aid of this sort from the Federal Government.

    Basically in this day and age, the two thirds of the United States which are economically well-off really don't need the advantages and the targeting and the support of organizations like EDA and ARC. But those under-served communities, the third of the Nation that haven't benefitted from the economic boom of the last 7 years, certainly are in need of this type of support system, and any targeting you can do along those lines I'd appreciate.

    I've provided full remarks, Mr. Chairman. I appreciate the attention of the committee and ask that my full remarks be extended in the record.

    Mr. KIM. Thank you.

    Are there any questions from the Members?

    Mr. TRAFICANT. I would just like to say that I want to—in your absence I said that you were late and tardy without excuse, but I did that because we missed you, and I want to thank you for the 103rd Congress, as the chairman of this subcommittee, and your chairman of Subcommittee on Banking, the fine effort that you extended to help to move EDA along.
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    You know, Paul, it has been 15 years since we reauthorized this, and we have let stagnate these programs because we just leave them in an appropriation cycle.

    I agree with you on loan guarantees, but I also want the Banking Committee that you sit on to continue to look forward to a program that I have espoused for many years, and that's the buy-down of interest rates when a bank or community development corporation invest their own money in economic development.

    I think that we're on the right track. We can help to guarantee loans, buy down interest rates. We've got the leverage and we've got to bring in the private sector money. And if they're going to believe that a project is good enough, they should be able to put their money up where their mouth is, and I think that's very important.

    That's the only thing I wanted to say to you. I wanted to thank you. I think you have, other than anybody on our committee, Transportation and Infrastructure, and this subcommittee, probably been more helpful to EDA and some of these programs than anybody in the Congress.

    Thanks for being here late, but thanks for being here.

    Mr. KANJORSKI. Thank you very much.

    Thank you, Mr. Chairman.

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    [The prepared statements of Messrs. Kanjorski and McGovern follow:]

    [Insert here.]

    Mr. KIM. Our next panel is Dr. Robert Burchell and Mr. John Thomas. Please come forward.


    Dr. BURCHELL. Mr. Chairman, I'd like to thank you for the opportunity to appear before you today. I have a shorter version and a longer version of what I'm going to say. I'll certainly give you the shorter version. And it's in the blue graphic material that you have before you.

    What I'd like to do is to direct your attention to that blue graphic material and, starting off on page two of that material, talk to you about a study that has been undertaken by Rutgers University, Columbia, the New Jersey Institute of Technology, the National Association of Regional Councils, Princeton University, and University of Cincinnati—so we have enough academics hopefully gathered in one place to try and at least come out with the right answers.

    We took a look at 203 public works projects that were completed 7 years ago, and the most important thing about this study is that it's not a sample. It is all of the projects that were from the public works program that were completed and received their last payment in fiscal year 1990, so we could get a slice of those projects and see essentially how they were doing.
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    And what we did in terms of getting this information was to mail information to those in charge of the projects, to call them and request information, to get additional information. We visited fully 25 percent of the sites, and, in addition to that, we requested and essentially held national seminars so that everyone that was involved with giving us information knew fully the kinds of information that we were requesting.

    Finally, once that information was gathered, we returned that information to the grantees to verify that that information was given, and given accurately.

    Now, if I could refer you to page three, which is the next page, what are the results of the study that we undertook? The types of projects—and, Mr. Chairman, you were talking about what types of activities EDA does, and you can see that it's heavily involved in water and sewer lines, industrial parks, and also does do buildings, roads, piers, and tourism projects. But, again, the bread and butter of what they do are the industrial parks and the water and sewer.

    We took a look at these 200 projects—again, not a sample. These are the universe of activities for performance. And we took a look at what these projects could do. Those 200 projects produced 108,000 permanent jobs, or 327 jobs per million of EDA money invested, at a cost per job of just over 3,000, so a very, very low cost per job, a very, very high productivity in terms of the number of jobs created.

    Each of these projects was able to leverage private sector money. For every million dollars of EDA investment, ten million dollars was leveraged in private sector investment. And not only was that leveraged in private sector investment, it went directly to the tax base of local communities.
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    With regard to project management, 99 percent of the projects were completed as planned, 91 percent were completed on time, and 52 percent of these projects actually came in under budget.

    In terms of them producing their goals, 96 percent of the projects produced permanent jobs 6 years after those projects were completed. You always get a couple of projects that go into failure, but, again, 95 to 96 percent of these projects produced permanent jobs 6 years after completion. And 84 percent leveraged private sector investment. And of that 84 percent, a good additional 10 percent, in addition to the 84 percent, leveraged public sector investment because EDA also does build prisons or contributes water and sewer money en route to a prison being built on a site, and also contributes to college classrooms and a variety of other kinds of things in terms of their infrastructure expenditures.

    One of the most important things that I would talk to you about is where these projects were built. These projects were built in locations where the poverty level was 40 percent below State and national averages, and where per capita income—the poverty level was 40 percent higher than State and national average, and per capita income 40 percent lower.

    So these are not the average suburbs in terms of where jobs are being created; these are very, very significantly impacted economic areas.

    With regard to the implications of our study, what we found was that the respondents, eight out of ten came to us and said, ''Without this funding, the projects would not have been completed; that the jobs created were critical and the funding was absolutely critical to getting the jobs created.''
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    We viewed the projects, went into regional offices, and we found that the projects were well managed, efficiently and effectively produced. We found that a significant number of jobs were created, and significant amounts of money were added to the local tax base.

    Again, I have a longer statement which is included in your folder, and if you have any questions I can entertain them at this time.

    I thank you very much.

    Mr. KIM. Questions?

    Mr. TRAFICANT. I just want to thank you for your report. I think much of this has come back to us in bits and pieces, but I think you've put an official seal on it. Your analysis is intelligent and well-prepared. I think the most important thing is that, with the limited dollars that we have, that we leverage private sector involvement, and we're looking forward to maybe even expanding that, and that's the real reason that I think we must reauthorize with innovation.

    I just want to thank you.

    The only thing I would like to say its this: is there any analysis that you did on distribution of EDA monies to the country by region? Did you find a focus of it in certain communities, or was it pretty much widespread?

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    Dr. BURCHELL. The public works is very, very widespread. At least in this range of funding, 44 out of the 50 States were represented with regard to those public works funds.

    Mr. TRAFICANT. Any analysis of rural versus urban and any one State or area getting the bulk of these dollars? Is there any red flag as far as the fairness factor is concerned?

    Dr. BURCHELL. Not really. Primarily rural, simply because these are the areas that need the economic stimulus, and an increasing role in urban areas, again with demographic and social statistics that are absolutely mind-boggling in terms of the levels of impaction. These are not areas that jobs normally get created in.

    Mr. TRAFICANT. I appreciate your analysis and study. I thank you.

    Dr. BURCHELL. Thank you.

    Mr. KIM. Any other questions? Ms. Norton?

    Ms. NORTON. I'd like to follow up on a question that the ranking member just asked. You said that EDA is playing an increasing role in urban areas. Well, EDA is right here in a very troubled urban area, the District of Columbia—troubled in large part because it lacks the resources that would be available to it if it were a State.

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    According to the information I have, between the fiscal years 1992 and 1996 EDA investment in community activities here totaled $175,000 for planning, or an average of $35,000 per year. Considering that the District is right here in your face, as it were, right here where EDA is headquartered, I'd like to know more about what is being done, as you say, increasingly in urban areas, and how those urban areas are chosen.

    Certainly, the case for economic development in troubled urban areas is overwhelming. I am in awe of what EDA has done in rural areas, and would want more of the same, but I need more information on what you're doing in urban areas, how they're chosen.

    I'd be very interested to know how one could overlook and the very troubled urban area in which EDA is now located.

    Dr. BURCHELL. Our study involved public works programs, and those public works programs come through an organized process in terms of submitting to a regional office for review, meeting certain requirements of impaction in the areas that those projects are developed, and being reviewed very completely at the regional office.

    So it's my understanding that everyone is free to submit. A variety of projects are looked over. They must be in accordance and follow the goals of the OEDP for the particular area.

    Again, based on merit, they're selected for inclusion in the EDA budget.

    Ms. NORTON. Could you give me an idea of what kinds of programs are now in place in urban areas?
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    Dr. BURCHELL. Well, again, we're just talking about public works. We're also doing a defense adjustment project and evaluation of the defense adjustment projects. But typically public works projects in urban areas involve the building of shopping centers, the building of and provision of utilities to allow that to happen, the building of markets which are no longer existing in most urban areas. And essentially, in addition to that, the building of industrial parks very, very typical. We found that at least 10 to 20 percent of the projects that we looked at were industrial parks now that are being planned for urban areas with good access to regional transportation systems.

    Ms. NORTON. Thank you.

    Thank you, Mr. Chairman.

    Mr. KIM. Are there any other questions from Members? The gentleman from Pennsylvania?

    Mr. HOLDEN. Doctor, I'd just like to thank you for your testimony and say for the record that I realize what an outstanding job the EDA has been doing, particularly in my home District in Pennsylvania.

    My home county of Schuylkill in rural Pennsylvania has unemployment somewhere between 8 and 9 percent, and EDA has been very, very helpful with the infrastructure grants, and we were able to put in an industrial park that has already attracted one Fortune 500 company and hopefully many are going to follow it there, and without the help of the EDA we would not have been able to do that, so keep up the good work, and we'll be calling you again, Doctor.
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    Dr. BURCHELL. Thank you.

    Mr. KIM. Mr. Duncan, would you like to make a statement?

    Mr. DUNCAN. No. I have no statement, Mr. Chairman, but let me just ask a question.

    Dr. Burchell, I'm becoming concerned that in my area of east Tennessee we've increased the percentage of land and forests, but we're losing a lot of small farms as more and more people move in, and I think that's—I guess that's inevitable.

    But I've noticed that even though the economy is very good in east Tennessee because of all of our growth, we have several or quite a few industrial parks that have all kinds of space available. And yet I know in a county near Knox County, where I live, they're trying to take over some more small farms and develop another industrial park.

    I'm wondering, are we getting overloaded with these industrial parks? And is that the primary focus of the EDA at this time, to develop more and more of these industrial parks? Because I'm wondering if we don't need to do more to try to save some of our small farms in this country, rather than building more and more empty industrial parks.

    Dr. BURCHELL. Again——

    Mr. DUNCAN. I'm just curious about this because I have no statistics on this. I'm just looking around and observing what I see in my home area of east Tennessee.
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    Dr. BURCHELL. The thing that was reported to us in the field with regard to EDA involvement was the agency's flexibility; that, indeed, the agency was able to adapt to differing situations and differing demands as those situations confronted local areas.

    So, at least in terms of us looking at these projects over time, there were more industrial parks earlier on in the completion levels of these projects. But as these projects moved into the later stages of analysis and completion, they were much more diverse and encompassed, again, shopping centers and other types of projects.

    Mr. DUNCAN. Do you have any idea of the last 100 projects that the EDA has approved, how many of those would be industrial parks?

    Dr. BURCHELL. I don't have those figures available, but I'm sure people from EDA could provide those for you, sir.

    Mr. DUNCAN. I don't have any question that EDA has done many good things, but I'm just saying I think we may be getting close to having an over-emphasis on industrial parks.

    Dr. BURCHELL. Well, again, the point that I wanted to make with regard to this is that EDA is involved in developing tourism centers, they're involved in developing college dormitories and college buildings, so it's much more than the industrial parks.

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    And the reality of it is that the regional review is so intense that rarely are you getting vacant industrial parks.

    We did not find vacant industrial parks, again, 6 years after that last money was granted to a particular site, so it was——

    Mr. DUNCAN. Maybe east Tennessee is just an exception, but I can show you some vacant industrial—I mean, there are factories there, but there's all kinds of empty land and signs up, you know, wanting companies to come in and all that, and I'm talking about an area that ''Fortune Magazine'' a couple of years ago had an article that said the Knoxville metropolitan area was the most popular place to move to in the whole country, based on the number moving in to relation to fewest moving out, and we've having boom times all over east Tennessee, and yet I can show you all kinds of empty industrial park space.

    I'm not saying that EDA shouldn't be there or shouldn't be doing things to help out, but what I am saying is maybe we should look at a wider variety of projects.

    I'm glad to hear you say that we're not just doing practically all industrial parks, because I'm not sure that emphasizing just that is—I mean, I'm all for getting industries in and providing jobs, but there may be certain other things that maybe we should do, too.

    I'd hate to see all the small farmers be wiped out because we keep on building more and more possibly unneeded industrial parks.

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    Anyway, thank you very much.

    Dr. BURCHELL. Thank you.

    Mr. KIM. Any other questions from the Members?

    [No response.]

    Mr. KIM. I have one question for you.

    Dr. BURCHELL. Sure.

    Mr. KIM. Your study, I understand, is not a final study. You've got some supplemental findings that will come out.

    Dr. BURCHELL. Right.

    Mr. KIM. When will that be ready?

    Dr. BURCHELL. The public works study is completed and we will do another study analogous to the public works, and we're in the process of finishing that now, on the defense adjustment program. That will be ready in approximately 2 weeks to 30 days.

    We also are taking a look at the multiplier effects of these direct jobs with regard to the public works projects, and I have a draft of that document in hand.
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    And then the final portion of this is a regression study which essentially says, given all of the kinds of effects that influence what happens to economic conditions as a site, can we isolate the expenditures of EDA as a salient factor in explaining that.

    Mr. KIM. Your conclusion seems very impressive, very positive about EDA's accomplishment. Also you mentioned that 91 percent of the projects have been completed on time, and half of them were under budget. That's very, very impressive. But let me ask a question. Each year EDA has barely survived because always Congress is debating on eliminating EDA. Why is that? It's such a successful agency, such a successful program, why are so many Members of Congress unhappy about EDA's performance?

    Dr. BURCHELL. If I were to venture an answer to that—and this strays, obviously, from the report—I would say that EDA doesn't sell itself enough, and EDA must be in the business of commissioning studies to evaluate its performance.

    Again, EDA is pared back as an agency, and those people in the field do their jobs. I mean, there's a level of oversight on those projects that is absolutely unbelievable.

    When you go into an EDA office, the folder on a public works project is 12 inches thick, and you can go down a half an inch and come up with exactly the same page and piece of information in any one of the regional offices because it's all there and it's all monitored. So there is a tremendous amount of oversight done by the agency to make sure that those projects come out well.
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    Mr. KIM. Thank you. Thank you very much.

    Mr. Thomas?

    Mr. THOMAS. Good morning, Mr. Chairman, members of the committee. My name is John Thomas. I'm here this morning on behalf of the National Academy for Public Administration, and I'd like to do four things, actually. First, let me tell you who we are; second, what we did; third is what we found; and fourth is what we would suggest.

    The Academy is an organization chartered by Congress 26 years ago, given the purpose of being a resource to Members of Congress to analyze, study, report on various issues and activities of the Federal Government. It is comprised of 400 fellows and functions in such a way that for each project it undertakes it comprises a panel of fellows in the Academy to oversee the work of that particular project.

    I'm here this morning as a member of the panel on the effort to look at economic development.

    Let me tell you now what we did.

    Two years ago the Department of Commerce asked the Academy this question: what's the appropriate future role of the Federal Government in economic development? In order to address that, we comprised a panel of a variety of people who had worked on issues specific to programs and projects in the Federal Government, but also a number of fellows who were economists and came from a number of other disciplines that we felt appropriate to address this issue of a future role.
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    In undertaking the project, we did several things. We took on an analysis of economic development policies and programs of all the Federal agencies so that we attempted to look at every Federal agency and what it was doing related to the issue of economic development.

    We interviewed economic development experts, both within the Government and without the Government. One of our members was from the Federal Reserve Board, who gave us access to a wide variety of private sector folks who are experts in this field.

    We prepared a report based upon those two pieces and extensive field work. Once the report was completed, we then convened a national meeting of roughly 300 people from throughout the country, all regions, all areas, all perspectives, to analyze what we had found and what we were suggesting. We took those conclusions of a 3-day effort and built those into this report.

    So we have prepared a report and we have submitted this report to you as part of testimony, and we would be happy to provide copies. We have some here this morning for any Members who may want to look at that.

    Let me tell you what we've found. First, we suggest in this report that there be some rethinking of some basic premises for economic development activities at all levels of government.

    Our panel came up with essentially four key findings. One is that the fundamental economic influences of the private sector and market forces must be incorporated into successful economic development plans. To reiterate that, the private sector market forces are a fundamental element to successful economic development.
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    A second and key point is that Federal investments in development efforts are critical to many States and localities, but not all.

    A third point is that no single Federal program is appropriate in all communities. However, the present multiplicity of programs creates unnecessarily high transaction costs for many States and localities in attempting to put projects together.

    Our fourth finding was that a very meager Federal investment in information sharing and technology severely constrains a national economic development effort.

    Those are our four major findings.

    Our conclusions come in the form of three L's: learning, leveraging and linking. We are suggesting, as a conclusion, that the Federal Government focus more attention to the issue of learning about economic development.

    What are the key things that are the elements that are critical to successful economic development efforts? We learn what those are and we share what those are at the Federal level, so we suggest that there is a key role for the Federal Government in helping States and communities learn about state-of-the art practices, to help reduce economic losses that result from unstrained bidding wars. We suggest that there are ways to improve decision-making around economic development activities, and there are a lot of learning around that, which are not now captured in any centralized way.

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    A second learning has to do with the suggestion that we need to leverage State and local efforts with the Federal Government so that we should be giving attention to States and communities with incentives to design and implement effective regional or inter-jurisdictional strategies; that we should encourage investment and development strategies that offer opportunities to generate jobs and income over the long term, rather than simply high-visibility projects, and that we give special assistance to States and communities seeking to create economic opportunities in distressed portions of the community.

    The third area in which we suggest attention be given is to linking Federal resources. We suggest that we substantially reduce the fragmentation of economic development efforts among a wide variety of Federal agencies; that there be establishment of permanent mechanisms to provide overall policy-level guidance to Federal activities as they relate to things like work force training, environmental protection, technology research, and other economic development efforts.

    The third point, we suggest that there be some reorientation of Federal programs, especially, Mr. Traficant, the business and finance programs towards strategies that address the underlying obstacles to obtaining credit, a point that you were making earlier in your introduction.

    Lastly, we would encourage States and localities to stimulate links among businesses in their own areas to enhance performance.

    In conclusion, we have suggested that if we are to be increasingly competitive in an economic environment which is now global, and as we attempt to transform social policies, the issues of learning, leveraging, and linking economic development are extremely essential to that effort.
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    Thank you.

    Mr. KIM. Thank you.

    Mr. Traficant?

    Mr. TRAFICANT. I want to thank you for your testimony here and to, in fact, be able to condense such an important report, as has the good doctor, into a very fine oral presentation.

    One of the recommendations, requiring recipients of Federal funds to disclose all information about incentive packages, I think that's already part of the law. I think we must do much more to enforce that mechanism.

    What concerns me, though, and something maybe that Mr. Duncan brought out now—we enjoy his concept of logic and thought on some of these issues—is we find that there are communities where you have businesses that are outside the area, end up going in the inner city area because they have some tax incentives and abatements, and they just transfer jobs. Many times you end up with less jobs and great packages, and you have school systems with an awful lot of problems.

    As far as this bidding war business is concerned, what is the one key element that you believe could abate that and give us some form of uniform type of policy or recommendation along those lines that we could implement that would negate the strong potential of continuation of abuse in those areas, where politicians are cannibalizing other politicians for the sake of short-term economic movement rather than real gain? And how much of that type of thing is happening that is not really true, new, real growth, is just a machination of transfer from one community to another over some political incentive?
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    Mr. THOMAS. I think the conclusion our group reached on that issue was that the Federal Government has an essential role in providing incentives for regional approaches to economic development; that we found, as the report you heard just before mine, an extensive amount of what we loosely defined in our group project definitions, not just at EDA but in all the Federal programs. We found there's a tremendous incentive to focus on project-specific activities, specific communities, without enough attention given to the impact, to the region.

    And so in our report we strongly urge that the Federal Government can play that role better than anybody else that we see in the system of pushing mechanisms that will force local governments to work and the private sector in those local government communities to work on ventures that have a collective benefit to the region.

    Mr. TRAFICANT. Along the leverage and linking recommendations you make, for years I have espoused—and I've been like a lonely voice out there on many issues, I'm sure, but on the one of buying down interest rates on projects. And we have all these groups that come before us and talk about leverage and linking, but no one has really come out and totally endorsed that concept.

    This is one point I want to make. We're now down to $340 million for this great country. That's not a lot of money to really make any kind of a change. Unless the leverage is going to occur from that $340 million, there will be no program.

    I think we must reward the private sector, financial institutions, for financial commitments into regions that should be identified by the Congress as needing economic redevelopment efforts.
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    I think what happens is that you get political focuses where everybody might be eligible, but I think, like Mr. Duncan talked about, we're cannibalizing some communities, we're killing farms for the sake of putting up some of these new industrial parks that have no tenants and the other one down the street, another county, is empty.

    I don't know. Maybe we have to ask for a study of that. But I am a little bit disappointed, I think, in the final analysis.

    We've come forward with something very innovative, and I believe the limited amount of money we have should be going towards incentivizing the private sector and the banks the old-fashioned way, putting money into our communities.

    Everybody said, ''Hey, let the Congress do it. Let the Government do it.'' I think this is where our fault is.

    Just briefly, have you recognized that as a phenomenon that you think must be addressed by Congress?

    Mr. THOMAS. The specific issue of the incentives investments we did not—the income interest, we did not look at that issue. What we did look at quite carefully, which led us to this conclusion about incentives, is that there are tremendous disclosure mechanisms in all the programs that we looked at, not just EDA. But frequently the economic impact to the overall community, even the local community, is not a key disclosure piece of information.
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    And so in my terminology it's kind of an auditing disclosure, keeping track of all the dollars so you know where they went and who benefitted from them.

    But we're suggesting that in all instances there should be an economic look that addresses the balance of the community, not just the entity or the region, the individual governmental unit receiving the money, but what is the economic impact to the balance of the community. As you've pointed out, it can be tremendously negative on other parts of the community. That's a perspective that we think can only be driven by Federal policy.

    Mr. KIM. Any other questions? Any questions from Members? Ms. Norton?

    Ms. NORTON. I appreciate this testimony. I'd like to reconcile part of it with prior testimony of your colleague.

    One of your findings would seem to me to be not only important but a truism: the fundamental economic influences of the private sector and market forces must be incorporated into successful economic development plans.

    But, according to the public works performance evaluation, much of that appears to be being done. I mean, they report, for example, that for every million dollars EDA invests, there is a $10.8 million private investment.

    I'd like, therefore, to know what the basis is for your recommendation. Do you believe that there is insufficient link between EDA projects and the private sector and private investment and market forces?
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    Mr. THOMAS. One of the points I hope I was making clear was EDA asked us to look at all Federal investment programs, economic development investment programs, and so that recommendation is not aimed just at EDA.

    I think probably we would conclude—and DeWitt John, who has spent the last 2 years of his life immersed in this project, may have more information on that. My sense of it is that EDA is the agency of all the agencies that has pushed the issue of ventures that are more than just a single entity, and so I suspect that the report you've given is a reference that at least in the case of EDA that issue is probably being addressed.

    The reality is the overwhelming dollars being put into economic development in this country are not within the Department of Economic Development Administration. They are a wide variety of other Federal programs, that funds support a variety of what you would define as economic development activities.

    Ms. NORTON. It's very useful to know, if you're not talking about EDA, what kinds of programs you are talking about.

    Mr. THOMAS. We will provide a list.

    DeWitt, is there a page in the report that lists the agencies?

    Mr. JOHN. There's a page in the report that lists all the different programs, page 65.
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    Mr. THOMAS. By the way, we think it's a critical issue that the Federal Government, perhaps EDA, help in this process of getting a sense of the discontinuity among that wide variety of efforts to address this subject of economic development.

    Ms. NORTON. Again, I think this is important. I mean, this is an important finding. I think it deserves more than a kind of headline recommendation and list of projects. If EDA is a model for how to make sure—and after all, in a country that lives or dies in the market system, if EDA is a model for how to do that, then it is important to know how other agencies can, in fact, do that and what they are doing that does not meet that standard.

    Thank you, Mr. Chairman.

    Mr. KIM. Does anyone else have questions?

    [No response.]

    Mr. KIM. I have a couple of questions for you.

    The basic difference between your study versus Dr. Burchell's study is yours is more wide-range? Instead of focusing on EDA's public works project, you're more broad range? Is that——

    Mr. THOMAS. Yes. EDA asked Dr. Burchell to look at a specific section of programs within the EDA. They asked NAPA to look at the issue of economic development across the Federal Government with a perspective of what do we need to do as we look at the future; that what we've got is a series of aggregated programs over the last 70 years, and as we look to the future what should we be rethinking as a Federal Government? And so that was the driving force behind our study.
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    Mr. KIM. You mentioned that, as our colleague mentioned a while ago, that the private sector market forces—have you ever looked at perhaps EDA's loan guarantee program, rather than just cash injection?

    Mr. THOMAS. We looked at—we did not analyze, but we looked at a wide variety of Federal programs, some in Treasury which are designed to be incentives to economic development. We did not look at that specific program, and I don't know whether your study addressed that or not.

    Dr. BURCHELL. We're looking right now at the EDA revolving loan fund, and one of the things that is coming out of that is that that EDA revolving loan fund is an absolute powerhouse which produces jobs and businesses assisted at the level of the public works effort.

    Again, these are the lowest cost per job that we have seen in looking at a variety of types of programs.

    So the real sleeper in terms of our findings is going to be when we report on the defense adjustment projects and the revolving loan funds. They are well monitored, they produce results, they assist businesses, and jobs are created, new jobs are created at a surprising rate. So that's going to be the finding of the study that will be released in approximately 30 days.

    Mr. KIM. I had a meeting with the folks from Orange County, primarily transportation people. They told me that $1 Federal loan guarantee can generate average $80 of private investment, and in particular cases almost $170, which is—I didn't realize that kind of ratio. I think we should look into more and more loan guarantee programs than cash injection.
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    Back to Mr. Thomas. You mentioned three things: learning, leverage, and linking. But on the learning process, economic losses created by this unrestrained and vigorous bidding process, what do you mean by that? The lowest bidder has been an American tradition in terms of awarding contract. What do you mean by this?

    Mr. THOMAS. Our reference was to communities that provide—attempt to persuade development in their community by offering a wide variety of incentives or mechanisms that make them more attractive than others—reduced taxes, a variety of economic incentives—and oftentimes that process becomes so intense that the jurisdictions are not keeping up with the analysis of what's the long-term impact to them.

    Mr. KIM. A competing process?

    Mr. THOMAS. So it's not a bidding, as far as business is concerned.

    Mr. KIM. Thank you. And on the leverage, you mentioned that a lot of projects may not generate jobs, but they are there because of the high visibility, and I guess it's because it's politically wise. What percentage of jobs like that—high visibility, even though it doesn't generate any jobs, do you know what percentage?

    Mr. THOMAS. Mr. Chairman, I don't have——

    Mr. KIM. You don't have any answer?
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    Mr. THOMAS. I don't have an accurate answer to that. We could get a——

    Mr. KIM. Roughly 20 percent, 30 percent? Is that really uncontrollably high?

    Mr. THOMAS. I don't know. We don't—I didn't have that in my information, but we would be happy to get that for you.

    Mr. KIM. I'd like to find out, because if it's that critical then I'd like to do something about this——

    Mr. THOMAS. Sure.

    Mr. KIM.——stopping this kind of projects.

    Fragmentation, I look at page 65, it's unbelievable. I don't know how many agencies are involved in this. My god, everybody does all the economic development.

    This fragmentation of Federal economic program is a problem because of the inefficiency. We try to consolidate. Do you have some suggestions how do we consolidate this?

    Mr. THOMAS. There is a section in the report that addresses that briefly. The Academy has done a series of reports over the years related to the question of consolidating and aggregating programs, and we'd be glad to get those to you.
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    I think our general statement would be that the fact that you are here addressing a reauthorization of a program which for, I guess, 16 years has not been reauthorized, means that the Congress, itself, has really not had a forum in which to address the question of how many programs has it created over the last two decades.

    And so it does require a mechanism within the institution, itself, to come back and look at this and say, ''Now, if we're going to look to the future, is this the best way to sort and aggregate these programs?'' And so there are a number of studies available which would be helpful guides to think through this issue, but it's clearly one that we would suggest would need some attention to which of these elements seem to fit together.

    We would not suggest that Congress create one economic development agency. We don't think—and we report that in our learning—we don't think that's the way to go, but we do think that some distillation of what's in the system would be very helpful to those people on the receiving end of economic development support.

    Mr. KIM. Well, I'm not suggesting that we should consolidate into one, but, for example, Commerce, they have more than three dozen different programs.

    Mr. THOMAS. Yes.

    Mr. KIM. Even Agriculture Department has a couple of dozen programs, EDA. I don't think they know what they're doing, how to coordinate these programs.

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    My question is: I think it's about time for us to look at this individual program and maybe select the top 20 and consolidate them. The successful programs should remain, others should eliminate. Perhaps EDA is—maybe we should consolidate, give that responsibility to EDA.

    According to Dr. Burchell's report, EDA has been doing an excellent job. I'm kind of believing that, too. So perhaps that's the best direction maybe to take.

    What do you think?

    Mr. THOMAS. Well, we would certainly concur that EDA has done an excellent job. I mean, we don't find anything in our report that suggests that EDA has not done an excellent job.

    Our learning around the issue of consolidation on other Congressional studies has been that frequently to be successful there has to be a mechanism that is more than a single agency being given the responsibility to define the future of other kind of competing agencies, and so we would encourage you to use some of our other studies, which suggest that a mechanism that is inclusive of a number of the key players be a party to the discussion of not necessarily eliminating ventures, but where could those ventures fit more effectively to leverage the advantage that they have to come up with a system that's more understandable.

    Mr. KIM. Well, some activities are unique, clearly defined, so that's hard to consolidate those.

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    Mr. THOMAS. Sure.

    Mr. KIM. But others are ambiguous. I don't know what they're doing.

    Perhaps if I propose a resolution to consolidating these programs, perhaps EDA should be the leading agency to look into this then.

    Mr. THOMAS. Yes.

    Mr. KIM. All right. Let's look into that.

    Thank you very much.

    The gentleman is recognized.

    Mr. DAVIS. Let me ask, how good has EDA been on targeting the right kind of economic development? You can mistarget sometimes. You can put a high-tech area where you don't have the job base, the education base to do it.

    I looked at the results of the survey. There are some successes, for the most part, some that aren't. How good a job of targeting?

    Mr. THOMAS. I think probably Dr. Burchell, who has looked more carefully at EDA——
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    Dr. BURCHELL. Again, our findings in looking at both public works and defense adjustment is that the report from the field is that EDA is diversifying the economies in the areas that it's working, so EDA has a real handle and a real understanding of economic development, and what is—they've been doing this for a long period of time—and what is necessary to change communities that were once dependent on agriculture or once dependent on manufacturing, and for the most part they're able to do it. Every once in a while they'll make a wrong recommendation. They'll recommend that somebody get in the private boat-building business and they get killed.

    But for the most part there are studies—feasibility studies, marketing studies that are done as part of defense adjustment and as part of the ongoing economic development activities, that look at the markets and look for niches in those markets and direct communities towards those niches.

    And, again, EDA does a very, very good job at those base studies and commissioning those base studies in terms of figuring out what is necessary in various types of markets.

    Mr. DAVIS. The track record has been, by and large, pretty good?

    Dr. BURCHELL. Track record is excellent.

    Mr. DAVIS. Thank you.
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    Mr. KIM. Thank you. I just want to make sure that you are praising EDA, which I'm glad, because you got paid by the EDA. It is an objective view, isn't it?

    Dr. BURCHELL. Well, the interesting thing about academic research is that professors are all tenured, so the only thing that we have to worry about is getting the results out and accurately, and I must say, with regard to EDA, it has been hands-off. And EDA knows, when it employs Columbia, Princeton, or Rutgers, that 6 months after it's done it's out. Like it or lump it, it's out.

    Mr. KIM. I'd like to recognize at this time a man who made such a successful EDA operation, Mr. Singerman. He is the one did all these good jobs.

    Thank you very much. I appreciate it very much.

    The next panelists will be Mr. Richard Cavender and Mr. Franklin Ching. Mr. Cavender is president of National Association of Development Organizations, and Mr. Ching is elected town representative, Natick, Massachusetts.

    Where is Natick, Massachusetts?

    Mr. CHING. It's 17 miles due west of the city of Boston.

    Mr. KIM. Sounds like where I come from, 40 miles east of Los Angeles.
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    Mr. KIM. He's also representing the Coalition for Economic Development.

    I'd like to welcome both of you gentlemen. I understand our Congresswoman, Mrs. Emerson, wants to introduce Mr. Cavender. Please proceed.

    Mrs. EMERSON. Thank you, Mr. Chairman.

    I appreciate the opportunity to be before the Subcommittee on Public Buildings and Economic Development to introduce a good friend and constituent, Mr. Richard Cavender, from Rolla, Missouri.

    While I don't sit on your subcommittee, Mr. Chairman, I do appreciate the opportunity to serve with you on the full committee, and also appreciate your giving me the time to introduce Richard.

    Mr. Cavender is the executive director of the Meramec Regional Planning Commission in Rolla, and is currently the president of the National Association of Development Organizations, so he really brings a wealth of institutional knowledge and firsthand experience about the importance of the Economic Development Administration.

    His strategic planning and persistence has paid off by making the Meramec Regional Planning Commission one of best-organized and well-known among economic planning commissions in the State of Missouri. It's located in the heart of Missouri, representing six counties and 23 cities of the Meramec River region. I think it's probably correct to say that it's a true snapshot of America, and its members, led by Richard, have really done a terrific job to ensure that economic development, expanding job opportunities, and enhancing the quality of life for the citizens in our region are top priorities.
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    Mr. Chairman, I am a strong supporter of the EDA and can tell you that the agency, working with our communities, has done an outstanding job in our State, and I'm pleased that the EDA continues to streamline its operations and stretch its Federal dollars in these times of belt-tightening.

    I personally fully support the reauthorization of the EDA, and though, you know, as I said, I don't sit on your subcommittee, I will offer any assistance I can to help get other Members equally as excited about EDA

    Richard has some specific suggestions about how to make the EDA work even better and more efficiently and why it should be reauthorized.

    Thanks, again, for giving me the opportunity to be here today. I can't stay for his testimony, but please feel free to call upon me. Thanks for giving me this opportunity.

    Mr. KIM. Thank you.

    Mr. Cavender?

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    Mr. CAVENDER. Thank you, Mr. Chairman, and I want to thank Representative Emerson for that kind introduction. It's really an honor to be introduced by your Representative, and I really appreciate that.

    I also want to mention and thank Assistant Secretary Singerman for attending this hearing and the interest that he has taken in the EDA. He has probably shown the most professionalism and has been the most effective assistant secretary I've seen in 15 years. I think he's really done a good job of streamlining the agency and looking forward to the future and making it an even more effective organization.

    Before I talk about the three reasons why I feel EDA should be reauthorized, I want to state on record that the National Association of Development Organizations strongly supports the reauthorization of ARC, the Appalachian Regional Commission, this year.

    I understand that that program and the benefits of ARC were fully covered in the first hearing, so I want to use my time today just to talk about EDA.

    The first reason I think EDA should be reauthorized is in terms of its traditional programs—infrastructure, planning, economic adjustment—these are Federal investments that give distressed communities the ability to re-enter or enter in the first place the economic mainstream.

    Year after year, economic development professionals and local elected officials in rural and small metropolitan communities identify infrastructure development as their primary need as far as economic development is concerned. For communities outside the economic mainstream, EDA's title one public works grants program is often the major source of that infrastructure funding for projects related to economic development.
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    Another highly-regarded and successful program that has already been mentioned this morning is the revolving loan fund program. However, Mr. Chairman, I believe the single most important adjustment Congress could make or could enact to make the RLF program work better, aside from providing more funding for that program, would be to pass legislation directing EDA to defederalize RLFs.

    Defederalization of RLFs will make the program even more responsive to locally-identified needs, and is one of NADO's top priorities.

    We urge the members of this subcommittee to continue the work of the 104th Congress and to consider the language on defederalization contained in H.R. 2145.

    In the process, we would also urge the subcommittee to increase the reauthorization level for funding of RLFs and direct EDA to simplify the existing RLF procedures.

    When Mr. Traficant mentioned interest buy-downs, I couldn't help but think of the EDA RLF program, because this is a case where we are able to, in partnership with local banking institutions, merge both the RLF funding and the private loan funds to provide a blended rate at a lower interest rate, and it has allowed some projects that probably would not otherwise have occurred.

    I think that's exactly the kind of thing that Mr. Traficant is referring to.

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    Secondly, Mr. Chairman, the EDA is a Federal program that delivers assistance that is tied directly to local private sector growth and according to locally-identified strategies. This approach is unique to almost all other Federal programs—the fact that locally we develop an overall economic development plan using local elected official input, local economic developers, private sector people, and we identify the best strategy for that region for its economic development, and then, using that plan, that's how we invest the funds that we're able to get from the Federal Government and from other sources.

    Since its inception in 1965, the Economic Development Administration has been the most flexible Federal program for bringing economic development to distressed communities. Not a single dollar is invested unless a substantial number of real jobs are created or saved, so you don't invest EDA dollars without creating jobs.

    Finally, Mr. Chairman, EDA supports a network of 314 economic development districts, or EDDs. These serve local communities as vital providers of professional and technical assistance. EDDs are multi-county, public/private partnerships whose boards are composed of local elected officials, private sector, and minority representatives. Not only are EDDs the core of EDA's delivery mechanism; they have also evolved into the central planning and service delivery mechanism for many other Federal programs in rural areas and provide professional staff assistance with local economic issues and opportunities.

    Districts help smaller communities who have few or no professional staff prepare applications for Federal and State assistance, and often administer EDA infrastructure and economic adjustment grants. They also are able to help communities apply for other Federal programs such as USDA's rural development grants and loans and Department of Housing and Urban Development community development block grant funds.
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    Most EDDs are entrepreneurial, extremely flexible, and provide assistance far greater in scope than that provided by EDA or the Federal Government program. Because they serve local communities and are, in fact, governed by a majority of local elected officials, they respond to the needs of the communities and deliver a variety of services to meet those locally-identified needs.

    I'd like to give you one excellent example of what EDA, through our economic development district, is accomplishing.

    Phyllis Hannan was named the 1996 small business person of the year by the Small Business Administration. She's the CEO of Laser Light Technologies, which is a high-tech business. She built her business in California, but when she got ready to expand her company she looked to her home State of Missouri. She kept her current operations in California, and she set up a second operation in Herman, Missouri. She has been so successful that she is now undergoing a second expansion, bringing even more jobs to the region.

    The first expansion of Laser Light Technologies was made possible through loans from the Small Business Administration and our EDA revolving loan fund. Those loans were administered by the Meramec Regional Planning Commission. The company is located in an EDA-funded industrial park, and public works grants from EDA helped build the needed infrastructure for the industrial park.

    Even her efforts to expand business opportunities in Germany were made possible by links developed through Meramec Regional Planning Commission, through an exchange program that was sponsored by the National Association of Development Organizations.
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    So all of these pieces link back to EDA. And Phyllis Hannan and the staff of Laser Light Technologies probably could not tell you very much about EDA; however, they can tell you a great deal about the Meramec Regional Planning Commission, and that's because these regional planning commissions or economic development districts are the face of EDA to our local businesses and communities. That's how local EDA's delivery system is.

    So I will conclude there, Mr. Chairman. I want to thank you and the subcommittee for inviting us to testify today, and I'll be happy to answer any questions or provide any additional information.

    Thank you.

    Mr. KIM. Thank you.

    Any questions from the Members? Mr. Traficant?

    Mr. TRAFICANT. Yes. I appreciate your testimony. You know, there are many, many areas, such as mine, that are attempting desperately to leverage the private sector money, and the revolving loan fund program is a good program.

    My proposal to buy down interest rates, do you see a natural tie there that could be used as a real incentive in bringing in more outside dollars, rather than just throwing dollars at projects, ourselves?

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    Mr. CAVENDER. Yes, I truly do, because no revolving loan fund money is used without the participation of a private sector bank, so what it's really there for is to make possible those high-risk loans that normally the bank would not take on by themselves. So it is an incentive for them to get involved. They have the protection there.

    In many cases, they keep the first lien on all of the—they have first lien on all of the assets and have less risk because they have less money in the project, so they're willing to do it.

    Mr. TRAFICANT. Do you have a specific community development corporation established there?

    Mr. CAVENDER. Yes. We set up a separate not-for-profit corporation that handles both our revolving loan fund program and the SBA 504 program. They handle both of them together.

    Mr. TRAFICANT. Is that a bank community development corporation or is that a public sector CDC?

    Mr. CAVENDER. It's more of a public sector CDC. It's established as a not-for-profit corporation. It's not a bank CDC.

    Mr. TRAFICANT. Let me ask you one other thing. How is the CRA, Community Reinvestment Act? How has the assessment been on participating banks in your region?

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    Mr. CAVENDER. You mean how are they responding to it?

    Mr. TRAFICANT. How are they stacked up in comparison with other regions of a given similar kind, because now we're showing that certain banks just don't get involved in certain areas, and many times those areas need the economic development.

    Mr. CAVENDER. I think the report would have to be mixed. In our larger areas, where our banks are more active in the community, we're getting a good response there. In the very rural areas, there isn't much response at all. They're small banks. They don't really see themselves as part of the community development effort at this point in time.

    I mean, that's the truth of it. I think eventually we'll have them all thinking that way, but it's going to take some time.

    Mr. TRAFICANT. Not to belabor too much time here, but one thing I was able to do in our community is finally get the banks to join forces in a participatory program, able to match private sector money from the banks, 15 participating banks, with Federal and local dollars we were able to put together from communities, and we pulled together about $15 million and created many loans. Many loans now are being run through the banks. They're qualifying them as very successful.

    If we could put together a real good interest buy-down rate program, they could further incentivize those types of loans, not to exceed, to start with, $50,000. Now the maximum says $100,000. I tell you something, it has been very good. And I think what you have done up there has been very innovative and progressive.
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    Maybe one of the things we have to do, Mr. Chairman, is we have to disseminate some of the good strategies and programs that have come forth from communities of good community insight and let other communities know about them.

    I want to thank you.

    Mr. CAVENDER. Thank you.

    Mr. KIM. I have one question for you concerning this EDD. They have 314 of them. One of the criticisms I heard was, according to EDA guidelines, 80 percent of these cities and counties are qualified.

    The second is, if you're not in the region, then it doesn't make any difference, you're not qualified. For example, my District is not qualified.

    Now, I happen to be a chairman, so I'm very interested, but other Members don't care because it doesn't apply to them.

    What do you think of the idea of eliminating this EDD concept so that anybody can apply so long as there is a pocket of poverty, which in my case we have a couple of them, and qualify under this program, 40 percent under policy level, etc.? What do you think about this concept, eliminating this 314 EDD concept and just do it nationwide?

    Mr. CAVENDER. Well, I guess my first response would be, one of the unique things about EDA is that they take a regional approach. And if you'll recall the testimony of the gentlemen that were up here before from the academic sector, they're recommending that we take a regional approach to economic development as we look at the impact of these projects.
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    So if we can find a way to build in that incentive to be regional and to plan regionally and to look at the impacts of economic development regionally, I think you could probably fit something like that into the process.

    I think if there are areas, pockets of poverty that do not qualify for one reason or another, there needs to be a way to address those, because that was the original intent of this program, and I think that is the—it needs to remain the intent of this program.

    So I think it can be looked at, but I think we need to retain that regional approach in whatever we do, and also the planning component of it. I mean, this is one of the only Federal programs left out there that has a planning component, and it is so critical that when we do these investments, we do these projects, that they're part of an overall plan that fits together and makes sense for everybody in the areas.

    Mr. KIM. The fallacy I see, as an example of Los Angeles, we have a depressed area and also have Beverly Hills out of the Los Angeles region. They're qualified. So it just, to me, the regional approach—I can understand the impact regional approach, but I don't see any correlation of why it has to be regional basis. What's wrong with an individual pocket area? In some urban areas, especially, we do have some affluent community and then there is a pocket of poverty area that just cannot get out of this poverty. Don't you think we should help them under this EDA program?

    Let me tell—what's wrong with eliminating this EDD concept? What's going to happen if you eliminate these 314 regional concepts?
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    Mr. CAVENDER. I think if you just eliminate it I think you're going to eliminate a regional approach and you're going to eliminate the planning component that is so important in this project.

    I think when you find, particularly in a metropolitan area like that, where you have pockets of poverty and you have other pockets of great wealth, you know, the solution, the long-term solution to that has to involve both communities. It has to involve those areas where the wealth has moved to, as well as those areas where it has moved from. Otherwise, you're only going to be addressing short-term solutions to that problem.

    You've got to take a regional approach to it if you're going to come up with a long-term, effective solution.

    Mr. TRAFICANT. Mr. Chairman, would you yield for a second?

    Mr. KIM. I'd be more than happy to.

    Mr. TRAFICANT. Not just a question for Mr. Cavender, but maybe to you, as well. Is it not a fact that there is an exception that could be applied for on behalf of these poverty pockets within, for example, the chairman's District, because the overall regional condition look so favorable, but within that favorable region there are pockets of exception? Is he not entitled to, or aren't those particular areas of poverty pockets eligible for an exception for participatory activity by EDA?

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    Mr. CAVENDER. I think that's true. We're talking about the existence of pockets in regions where there are pockets of poverty and maybe the region doesn't qualify for EDA assistance but the pockets of poverty can be made exceptions and qualified.

    Mr. TRAFICANT. I think the point I want to make is that, like Chairman Kim, sometimes communities don't realize that they have opportunity; that maybe the surrounding area is doing great but they have tremendous impactive problems. So the chairman does have that availability to him.

    Mr. KIM. I'd like to—maybe perhaps the next speaker, I understand he's going to address this issue.

    Thank you very much.

    Mr. CAVENDER. Yes, sir.

    Mr. KIM. Mr. Ching, I can hardly wait. Please go ahead and proceed.

    Mr. CHING. Thank you, Mr. Chairman, members of the panel. Thank you very much for inviting me here today.

    My name is Franklin G. Ching, and I am the elected town meeting representative of the town of Natick, Massachusetts. I guess in New England we're still one of the last bastions of the true democracy, or some people say the Home of the American Revolution, and other people say we're just plain revolting.
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    But I am the past president of the Metropolitan Area Planning Council, which is the overall regional planning organization for the 101 cities and towns around the greater Boston area, and we do, in fact, include the center city of Boston, and we also include many of the cities and towns that Representative McGovern represents out in his District, as well, and it was good to see my good friend and neighbor here earlier this morning.

    But I'm also here to represent the Coalition for Economic Development, which is a group of 11 organizations which have come together to support the reauthorization of the Economic Development Administration and the Appalachian Regional Commission.

    Just quickly, let me go through the list. It is quite a varied list: The National Association of Counties, the National Association of Management Technology and Assistance Centers, the Educational Association of University Centers, National Association of State Development Agencies, the National Council for Urban Economic Development, the U.S. Conference of Mayors, the Public Works and Economic Development Association, the National Association of Development Organizations—my friend here—and the National League of Cities, the National Association of Towns and Townships.

    I know I went through that list very quickly, but English is not my native language and I'm doing the best I can.

    The Economic Development Administration and the Appalachian Regional Commission are agencies that truly empower local communities and regions, and I think that's really important. They provide funds to develop the needed infrastructure, Mr. Chairman, as you so correctly noted, to support business and industrial development, but they also provide funds to plan for future economic development and strategies and growth within the regional organizations.
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    They work on a local level. They have regional organizations. The economic development representatives in EDA's case do provide the outreach and project development for local communities in every State.

    And I think it's clear that the small investments that these programs have made in revitalizing the economics of certain distressed rural and urban areas have certainly paid dividends, as was noted here earlier today by the learned colleagues with the ''doctors'' in front of their names. I also have a Ph.D. from MIT, but please don't hold that against me. I only use it for restaurant reservations and hotels.


    Mr. CHING. But they've certainly created jobs and have assisted local, state, and Federal Government by putting new businesses and industries on the tax rolls, and I think that's really important.

    In my statement, I have attached examples of how EDA has, in fact, worked, and also ARC. In the Appalachia region they have significantly impacted economic growth. As a matter of fact, Mr. Chairman, I believe in your own State of California in 1996 that EDA provided $8.4 million in funds for post-disaster recovery and base closures. As a matter of fact, I just received the latest numbers, which was not included in my statement yesterday, that, in fact, those numbers have increased to $106 million in 1997 for post-disaster recovery, defense downsizing, and infrastructure. And as of June, Mr. Chairman, another 72 projects totaling $76.76 million are pending approval.
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    I think that it is clear from the list that I've provided in this testimony that EDA is, in fact, active in every single State represented on this committee, and the ARC is active in three of those States represented here.

    Mr. Chairman, in response to one of your earlier comments to one of the earlier speakers—I believe it was, in fact, Mr. McGovern—you asked about the partnership, of whether or not it was truly a grant program or, in fact, a partnership program. And I think it is quite clear that it is a true partnership program; that the recipients of the grant monies are required to put up a certain percentage, whatever they can afford—and in Mr. McGovern's case I believe it was stated 50/50—but, in fact, they are required to participate and provide a local match, and I think that's extremely important.

    It's not just a straight grant program; it's a program that requires people to participate.

    And through EDA and through partnerships formed under ARC, the Federal role in the domestic economic development, in fact, does become a partnership between the Federal Government and the local governments.

    Another issue—and it's funny that you bring it up, Mr. Chairman—was the issue that EDA has frequently been criticized for allowing 85 percent of the country to participate, or at least be eligible for participation in this, where, in fact, I believe the true number, if you look at the actual number of projects, is only one-third under the current designation, one-third of the country is eligible, but there are exceptions, as noted before, Mr. Traficant, to the issue of pockets of poverty.
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    The designation as an EDD does not necessarily mean automatic funding, either. I think that you still have to prove your case and you still have to be able to participate to get the money. So just the mere designation of an EDD is not guarantee of funding.

    H.R. 1430 would further tighten the requirements, as we understand them, and the Appalachian Regional Commission is also ensuring that its funds go only to the most distressed communities within its area, and the agency's approach is outlined in H.R. 1429.

    We believe that both these agencies are, in fact, responding to the Congressional concerns that you and others on this panel have brought up concerning this eligibility requirement.

    As the president of the National Association of Regional Councils, which represent many of the planning commissions, councils of government, development districts, and metropolitan planning organizations throughout the country, we have a particular appreciation for both of these agencies. We believe that, in fact, a portion of the success of EDA and ARC is based on work through thorough, stable, in-place organizations, and certainly the economic development districts and the local development districts, both EDA and ARC, that really help communities design cooperative economic development initiatives and assist local governments and community-based organizations to achieve these goals.

    Mr. Traficant brought up an interesting argument or point about the cannibalization, if you will, of different political organizations to try to attract business into their own home areas, and that we have found at the National Association of Regional Councils that there are, in fact, a vast number of examples of people that have organized regionally and taken a regional approach to economic development to help balance development across a region so you don't, in fact, get into the cannibalization, if you will. We would be happy to provide you, Mr. Chairman, and other members of your committee with those examples from across the country of regional approaches to economic development which I think are extremely important.
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    I'd just like to quickly touch on the future role which we would hope that this committee would look at.

    Despite the year-to-year, as Mr. Traficant and others have talked about, the year-to-year survival of these programs, EDA and ARC have truly forged ahead to achieve the goals of assisting the distressed urban and rural areas.

    The Rutgers' study and other studies by the Academy have shown that time and time again EDA investments are far more effective than previously realized. They are successful.

    Therefore, we would hope that this committee would report out a multi-year reauthorization, perhaps as proposed in H.R. 1430 and H.R. 1429, that would, in fact, strengthen EDA's and ARC's abilities to streamline the programs and develop long-term plans to meet their goals.

    As EDA and ARC look to the future, we also urge this panel to consider other areas where the expertise that has been created over the years of these economic development professionals can be involved in Federal programs related to economic development.

    Mr. Chairman, you noted in the Academy's report on page 65, the vast number of other agencies that are out there doing economic development work. I think it is important to understand that EDA, itself, has entered into more than 30 agreements between agencies to try to enhance economic development on a cross-agency basis. They have already forged these partnerships and perhaps are looking at ways to link together to improve the delivery of services and monies into that area.
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    There is one more area I'd like to touch on. Many brownfield sites across the country have been given over and taken over by the cities and towns as part of a tax lien or the nonpayment of taxes issues. Brownfields are going to become a very, very important issue for local governments that they must take care of, and EDA certainly can play a future role in this, as well.

    I notice I'm running out of time. I don't want the buzzer to go off, so just in closing, Mr. Chairman, I think that Ms. Norton brought up a very good point about the inner city, the distressed areas, and they have been talked about earlier. It is, in fact, particularly with the issue of the welfare-to-work proposals that have come before Congress, also going to be very important that EDA and ARC can certainly create an important part of.

    Thank you very much.

    Mr. KIM. Thank you for your fine statement.

    Are there any questions from the Members? Mr. Traficant?

    Mr. TRAFICANT. I'll tell you what, Doctor, I don't know why they have ''Mr.'' there.

    You know, my Dad, when I got my M.S. degree, said, ''Just remember this. He said, ''The word on the street is 'M.S.' is 'more of the same' and 'Ph.D.' is 'piled higher and deeper.'''
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    Mr. TRAFICANT. But I enjoyed your testimony. I want to thank you, on behalf of the country, as the president of National Association of Regional Councils. I'm one that agrees with you totally that there must be a regional approach where the entire community works together, and this would stop cannibalization, it would stop duplication, and it would begin to prioritize efforts.

    So, along those lines, in your role and what you've seen NARC doing, is that an overt sort of program goal that you have and that you attempt to do in forming these regional councils and making sure that they're operating successfully?

    Mr. CHING. Yes, sir. Absolutely. And the reason is I think that there is a growing realization and an understanding that people in the suburbs are extremely dependent on the center city, and the health of the center city and the overall regional aspect and the regional health of the economy cannot stand to have pockets of poverty. The distressed areas can only detract from the regional health, and therefore it is, as you say, an overt part, an overt effort on our part to have regional approaches that try to address each one of these distressed areas as part of an overall approach. Absolutely.

    Mr. TRAFICANT. Not to over-belabor this, but from your position have you done any co-relation with economic development activities and the regional council and the impact of local public policy on school systems in distressed communities? I don't want to get off the subject here. That's really not our focus. But there are an awful lot of problems in distressed communities with that.
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    Mr. CHING. Yes. As a matter of fact, I am also a member of the committee in Boston called the Challenge to Leadership. That was one of our primary purposes for the last 2 years, which is a broad-based organization of community leaders, business leaders, educators, and people that are involved to look at the school issue, itself, in the city of Boston. I think that there are many of those efforts across the board that we can certainly provide you with information on.

    Mr. TRAFICANT. If you have any goals or anything that you've done or any suggestions, recommendations, or studies or analysis of tax abatements and effect on school systems in impoverished communities, just send that to me. I don't want to belabor it.

    Mr. CHING. Yes. I'd be happy to.

    Mr. TRAFICANT. I think that would be very good for us. Thank you.

    Mr. KIM. At this time Dr. Cooksey will be recognized.

    Mr. COOKSEY. That's an M.D., not a Ph.D.


    Mr. COOKSEY. I enjoyed your comments. It was very well done—an engineer, I'm impressed. We need more people with math backgrounds and technical backgrounds. I have this philosophy that the big problem in Washington is that no one up here has ever had a math course or an accounting course and they don't know what a balance sheet is. But I am impressed.
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    What is your native tongue?

    Mr. CHING. I'm sorry?

    Mr. COOKSEY. You said English is not your native tongue. What is your native tongue?

    Mr. CHING. I spoke Chinese for the first 7 years of my life.

    Mr. COOKSEY. I see. Good. Well, in the south we're still struggling with English in many places.


    Mr. COOKSEY. Well, anyway, I enjoyed your comments, and you were right on target about the regional approach. We have that in my area. I represent an area, geographically the largest Congressional District in Louisiana, that is largely rural, farming, but we have some pockets that are just real problems for the entire area, and you're right about a regional approach. It would avoid some of these problems.

    Your comments were very apropos. Thank you.

    Mr. CHING. Thank you.

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    Mr. KIM. Mr. Tom Davis, M.A.


    Mr. DAVIS. It's J.D., doctor of jurisprudence. I don't know what that is.


    Mr. DAVIS. I have a couple of questions.

    Particularly being from Boston, the 128 corridor, they're having some of the same problems we're having in terms of qualified people for the jobs available and all. It seems to me the great challenge for us is with the information revolution taking place around the globe, the differences we have now between the have's and have-not's, that the gap doesn't widen. This is an opportunity, if we handle it correctly in inner cities and the other places, to give them a place able to build, and yet we have not been successful to date. That's why I like the regional approach. But education is a key component of that, as Mr. Traficant noted before.

    How does the EDA work in—how do you see that it could do a better job? How is it operated today in kind of recognizing the educational and the training components?

    So often in our area—I'm from the Washington area—training is more important than the educational requirements per se, but we have jobs that are going offshore because we can't find qualified workers in this country to fill them.
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    Mr. CHING. In direct response to your question, I think that EDA can certainly be participants in the job creation issue, which an education is extremely important, but there is also something that people don't realize, and that is that in the support for the building of infrastructure, such as roads, such as other types of bricks and mortar, if you will, that there is also an opportunity to lay things such as fiber optic cables.

    If you think about that in terms of providing——

    Mr. DAVIS. Infrastructure.

    Mr. CHING.——exactly, providing the infrastructure for the information revolution, that, as you teach—and, again, I'm still amazed that when I was a freshman at MIT I was teaching FORTRAN to some people. And I still remember the punched cards, whereas my daughter, who is now going to be a freshman at AU next year, American University, went and did an AP French paper in 3 hours on some obscure French painter by going into the Louvre web page and downloading it all in French.

    Normally what would take us at least 2 or 3 weeks of research back in our time, now they can do in almost an instant.

    So you're absolutely right that the job creation aspect and the support of activities that help education, to provide those that do not have, to enhanced school systems, if you will, to provide the opportunity for people to learn how to use computers and to learn how to use internet and to learn how to use a keyboard, and then use the EDA funds and ARC funds to, in fact, create the infrastructure that helps enhance the use of those has a lot of benefits across the board, and not only in economics but certainly in environmental. It reduces the amount of travel that people do back and forth. Air quality could be improved.
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    You can use your limited dollars much more efficiently by tapping into this information revolution, and I think that's an excellent point that we could certainly bring and hopefully that you would bring to the reauthorization bills.

    Mr. DAVIS. Thank you.

    Mr. KIM. Any more questions?

    [No response.]

    Mr. KIM. I have a couple of questions and comments.

    Dr. Cooksey, I want you to know that I'm an engineer by profession. Speaking of math and science, I got all A's in math and science, and I got flunked out in political science.


    Mr. COOKSEY. Mr. Chairman, you have made a remarkable recovery.


    Mr. COOKSEY. Let me jump in and say, Chairman, you've come a long way.
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    Mr. KIM. Again I want to talk about this pocket of poverty again, especially in California. We have one area like that in my District, and it has been I don't know how many years, and people say, ''Don't go there.''

    I went back. Twenty years later it looks the same—boarded houses, graffiti, and just depressed. But 10 years from now it will be the same again. It is just somehow contained, and they're not expanding somehow. They did a pretty good job to just contain. And everybody knows that that area has high crime area, whole area. Everybody tries to stay away from it. That's not right.

    And the EDA program that we talked about today has mentioned jobs. One million in investment will create so many jobs. Perhaps this pocket of poverty area investment may not create jobs. This is very important to me.

    If you took a wrong turn, you are in trouble. This is the only country that we have such a system, such a situation. If you go overseas, there aren't such areas. You can make a wrong turn and still steer okay, but here we have that kind of situation.

    Now, we've been emphasizing inner city all the time, ignoring suburban area. We have the same problems there, too. As a matter of fact, they have a strong tax supporting groups, they've been ignored.

    Now, your presentation has been very impressive. I agree with my colleague, Mr. Traficant. Do you have any written report that we can read, any report you've done on this particular issue?
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    Mr. CHING. Absolutely, Mr. Chairman.

    Mr. KIM. Can you mail us a couple copies?

    Mr. CHING. Yes, sir. I will be happy to do that.

    [The information received follows:]

    [Insert here.]

    Mr. CHING. We will provide you with all the information that we have in terms of not only, as you say, the inner city issues of pockets of poverty, but there are, particularly in the older cities—for instance, Boston, or even, as Ms. Norton says, Washington, DC—where they will have suburbs that have pockets of poverty, that because of the age of their cities and the development patterns around, that they, too, are affected. So it's not only the inner city.

    And I think that there is a wealth of information out there, at least that people have looked at on a regional basis how to try to tackle that particular issue, and it is a tough one. Where do you break that cycle of poverty? And how can you, in fact, enhance the job creation, the opportunities, if you will, rather than the hopelessness of the areas that you talk about where, in fact, if you make a wrong turn you're in deep trouble?

    So I think all those issues are extremely important and, again, we would be happy to provide you with all the information that the National Association and others have.
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    Mr. KIM. Mr. Traficant?

    Mr. TRAFICANT. I appreciate your yielding.

    I'd like to make unanimous consent, Chairman—I've served on this subcommittee for many years, many times, and I've been very impressed with the meeting that we held today. I want to compliment you. I want to ask unanimous consent that the panel participants today be allowed to take 1429 and 1430 and offer legislative suggestions in the form of amendments that they think would bolster that bill, send them to us in a reasonable fashion that we could distill and digest their recommendations, and see if we might incorporate their good planning ideas into our legislation where we might be lacking.

    Mr. KIM. Any objection?

    [No response.]

    Mr. KIM. So be it. Thank you.

    Mr. TRAFICANT. Thank you, Mr. Chairman.

    Mr. KIM. Thank you very much. We appreciate it.

    The next panel consists of Mr. Erik Pages and Dr. April Young.

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    At this time I'd like to recognize Congressman Tom Davis from Virginia, who will introduce Dr. April Young.

    Mr. DAVIS. I am just very pleased to have Dr. Young—it's a Ph.D., Mr. Traficant——


    Mr. DAVIS.——before our committee. Actually, she started in St. Louis but she came to Fairfax County when I was a member of the Board of Supervisors to be the director of our economic development authority and really put it on the map.

    She rose from there to be the head of the State Economic Development Authority, and is now the executive director of the Potomac Knowledgeway Project in Reston, Virginia. And you can see in her introduction that the Potomac Knowledgeway Project is—I don't know if it's one of a kind, but it's one of very few of its kind in the country. It's really a collaborative effort focused on fostering the growth of new and existing companies in the knowledge industries—information technology, telecommunications, and those areas—and retaining work force competition in the global information-driven economy.

    So, while she's speaking today on behalf of the National Council for Urban Economic Development, I consider her one of the true experts in this field, and we're proud to have her before this committee.

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    Thank you.

    Dr. YOUNG. That was nice. Thank you, Tom.

    Mr. KIM. Would you like to start first, please?


    Dr. PAGES. Thank you, Mr. Chairman. Thank you for including us. It is a pleasure to be here.

    I am here in my capacity as president of the National Council on Urban Economic Development. We are part of the coalition that you just heard from.

    You have my written testimony. I thought I would take a minute, knowing that I'm at the end, and really speak to you from my heart.

    I am the oldest living economic developer, I think, so I've been everywhere. I was the director in St. Louis, a city with enormous difficulties. I worked in Chicago. I came to Fairfax and had the privilege of being there at a time when, if I had done nothing but sit in my office, we'd have exploded because of the explosion in the U.S. economy. I have overseen the economic development issues in the State of Virginia, which is a State much like—it has parts of California, Ohio, Louisiana. Believe me, we have one of everything. And I have enormous affection for the parts of our State and our Nation who have been, to one degree or another, left behind by the rest of the economy.
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    As Tom knows, and Bill—who has left, because he knows what I'm going to say—I am fond of trying to simplify things, so I'm going to give you my remarks in terms of five L's, the five L's which I think would explain why you should do this, and they are: leadership, legacy, leverage, learning, and love—as corny as that is going to sound.

    The EDA has, for many years, for those of us who have been working in the brownfields, greenfields, and other fields, been a source of continuing inspiration and support, a willingness to stand behind those of us who were working at the local, regional, and State level to help us get things started.

    One of my favorite examples actually comes from Ohio. An organization that I am involved in is a small flexible manufacturing network made up of small companies in very rural Ohio. They have come together to provide economic growth in a region that had none. They are part of the ARC region.

    What they've done is identify a couple of unique product areas—food products, believe it or not, for people with serious allergies, and furniture products for people with physical disabilities—and by networking, these eight or ten small manufacturers—I think there are 20 food manufacturers—they have created an economic core in an area that has otherwise been very poor. That can't happen without some leadership from the Federal Government.

    The second is leverage. You all have heard probably more than you want to hear about the return on investment. I do think you've heard from the public administration report about why there should be a Federal role, and I certainly am not here to presume to tell you why there is a necessary Federal role. But the Federal role is critical because it creates leverage, because it can take both a leadership position and begin a process of thinking, of collaboration, of identifying mutual self-interest. And the leverage that EDA has achieved across its history is excellent.
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    The legacy is really one that we are very familiar with. You know, when the Mississippi goes over its banks, nobody thinks twice about an emergency role. I'm here to tell you that when the U.S. Navy decided it was going out of the submarine business, Norfolk had an emergency just as serious. And what has happened is we've watched that move around the country.

    In your wonderful area, Mr. Kim, in California—when I started in this business, California was the place to be, and by the late 1980s and early 1990s in Silicon Valley they'd lost 50,000 jobs in the chip industry.

    We can get in. There is a need for an emergency response as there is dislocation.

    The fourth is learning. One of the unique roles of EDA has been for practitioners, for public officials to be a source of information. We don't—as you know, as an elected official, every time you get a new city council or a new county council or regional council they set out to start over. One of the things EDA has really been a national leader in and a great asset to those of us at the local level is in gathering information, teaching us how to bench mark, how to look for best practices, to go to school on one another so that when you start looking at a brownfields program or a redevelopment program such as you need in your District we have some ideas how to do it.

    Finally, love. I know this is corny, and it's currently out of fashion, but ours is a country that is built on a concept of social justice, of using the resources of the many to help those who cannot necessarily help themselves.
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    I believe that the EDA is a symbolic effort on the part of the Federal Government to work with those populations who are not otherwise engaged.

    You've touched on something very close to my heart, as Tom will tell you probably—he knows more than he wants to about my belief that the best welfare program in the world is a good job.

    We are fortunate enough in the U.S. economy to be at a millennial opportunity to draw people into the economy for which the last economy, the industrial age, was not so hot. And I think the Federal Government has a critical role with EDA, and other programs as well, clearly, to essentially take advantage of the most wonderful resource we have, which is our people.

    We cannot afford in global competition to have 10 percent of our population, our inner city population, our rural population, not participating in this economy. It just won't do.

    So I would urge you—I am here as a constituent of Tom's, as an economic developer, as I guess an economic development leader, to urge you to pass a multi-year reauthorization. I think my colleagues have been very articulate. We have moved as a practicing fraternity to understand the regional approach.

    I think Mr. Traficant's proposal is an excellent one, and I would hope to see some of these things encouraged.
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    Thank you.

    Mr. KIM. Thank you.

    Mr. Traficant?

    Mr. TRAFICANT. I appreciate that. I appreciate your support for an interest rate buy-down program to be tied into CDCs. I'm sure you probably worked with the banks and you've leveraged banks along the line, and I think that's one of the problems we have in the inner city, especially—sometimes the banks aren't involved.

    You bring out two good points, though. Number one is networking. There will be no success without networking and having that big switchboard everybody can plug into.

    Sometimes we can play a leadership role there and we can set some direction, but the local community has to have enough chemistry to make that happen.

    But you brought up a very good point, and I'd like the staff to at least let us know at some point on either side if I'm maybe missing something here about an emergency EDA response mechanism to areas such like Norfolk.

    You know, you have a hurricane in Florida, we have an emergency plan that steps right in because of the impact that takes place. I think that Dr. Young makes a very good point that when you have an economic demise that hits you right in the face so fast there is such an emergency.
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    What is the status of the type of emergency response mechanism within current legislation, if any? And, if not, maybe some language to see if maybe we can do something along that line to tailor a priority, at least, position of projects within those particular areas on a more-accelerated basis.

    How do you feel about that?

    Dr. YOUNG. Actually, EDA has really a wonderful track record in that. They've been very sympathetic in a variety of ways. Also, specifically in the Norfolk situation, the base realignment program, the Department of Defense has a pretty good program to step in. But I think it is a critical role because we see it all over.

    Just yesterday the aluminum can people announced they were going to cut half their production capacity in Richmond. Richmond is a center city in an otherwise rapidly-growing community, and those manufacturing jobs and those wages are going to be very hard to replace.

    It is a critical function.

    Mr. TRAFICANT. My District got hit with the same phenomenon.

    Dr. YOUNG. Youngstown has really seen it from coming and going.

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    Mr. TRAFICANT. But, you see, the Base Realignment Closure Commission has some special designation given to that whole phenomenon, but on absolutely economic collapse other than military-related I'm not so sure we have a response. I think that's important. We thank you for your testimony.

    I yield back my time.

    Dr. YOUNG. I just want to tell Dr. Cooksey that I have a Ph.D. in statistics, so I don't know anything but I can keep track of what direction it's going in.


    Mr. KIM. Mr. Davis, do you have any questions?

    Mr. DAVIS. I do.

    One of the great headlines when Dr. Young was the head of our Economic Development Authority I'll never forget. ''Unemployment rises to 2.5 Percent in Fairfax.'' They were great years. They laid a strong predicate. And it came about because you had a business community working, building with a vision and a direction of where they needed to go.

    Oftentimes people want the jobs, and it seems to me in some of the areas they get hard-hit, like Richmond or Norfolk, and the first reaction of the community is generally, ''We've got to protect our jobs,'' and you get rules and regulations that may save a few jobs there but they discourage the investment coming in from new people wanting to locate in looking for an attractive place.
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    It's a tough balance, and EDA can sometimes help with the strategies to get through that.

    Dr. YOUNG. Yes.

    Mr. DAVIS. But it's a natural reaction, when jobs pull out, to protect what you've got instead of looking ahead to the next step, what is going to attract capital and investment back into our communities.

    Urban areas and cities have gotten caught up in that.

    Dr. YOUNG. That's right.

    Mr. DAVIS. And we've seen that with the District of Columbia, where they have a lot of well-meaning laws, but what they have ended up doing is just moving jobs to suburbs, because it is now a very local marketplace, very transient marketplace, and people go where it is cheaper to operate.

    Just a good planning strategy worked so well in Fairfax.

    Dr. YOUNG. Yes.

    Mr. DAVIS. We could have gone in a different way. As you remember, there were political leaders who wanted to go in different directions. But with the right strategy, building on that, the leadership, as you will, and the critical mass and so on, it can happen. And it's going to be a different strategy in different communities.
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    The previous panel talked about regional, and I agree with that, but the urban centers have to be a part of that.

    I'd just ask, Dr. Young, for your comments. EDA has been successful with that, you think, in working with bridging the gap?

    Dr. YOUNG. Yes, I do think so. In fact, in Ohio, with the downsizing of the rubber industry, what has replaced it is a very sophisticated ceramics industry, a variety of later-stage manufacturing products.

    Mr. DAVIS. It bounced back?

    Dr. YOUNG. All right. I knew I could see the twinkle in your eye. But I don't know Youngstown as well, but it is fascinating. I was in Cleveland a few days ago—and I was raised outside of Buffalo. The only place worse on earth than Buffalo was Cleveland. Cleveland has really emerged as an extraordinary urban center.

    I think, Tom, that this emphasis on regionalism, we are paying an enormous price for allowing—I mean, it's a free economy, of course we allow people to move, but in the process of not understanding how inter-dependent these economies are, I think it's a pay me now or pay me later public.

    Mr. KIM. Doctor Young, I'd like to remind you that not only are you a good friend, but it's a public hearing and perhaps we would like to advise you not to use first name.
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    Dr. YOUNG. I apologize. I'm sorry.

    Mr. KIM. Any questions?

    [No response.]

    Mr. KIM. All right. Thank you very much, Dr. Young.

    At this time I'd like to recognize Dr. Pages, who also has a Ph.D.

    Dr. PAGES. Thank you, Mr. Chairman. My Ph.D. is in political science, and I got all A's in political science and flunked math and science.


    Dr. PAGES. So, Dr. Cooksey, please be kind.

    I want to thank you for allowing me to have the last word today. I'm Eric Pages. I'm vice president at Business Executives for National Security. I have been asked to provide you with a perspective on EDA's defense adjustment programs, and I'll try to do so based on my experience both inside EDA and outside of Government.

    At the outset, let me state my belief that America's post cold war defense adjustment efforts have been an unsung success story, particularly when we talk about communities impacted by military base closures and realignments, and EDA's defense adjustment programs played an important role in the success, and for this reason BENS supports reauthorization of EDA.
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    While EDA's efforts have been largely successful, they've only touched the tip of the iceberg. In fact, there are two main problem areas I'd like to talk about today. One is limited dollars available with a heavy demand, and two is the high cost of infrastructure finance at closing military bases. Let me touch on these very briefly.

    First off, as I said, EDA defense assistance is in very high demand, and this demand is unlikely to decrease over the next 5 years. This continued demand will result first off from new needs, such as additional rounds of military base closures. It also stems from the fact that we actually haven't closed a lot of the bases that have been announced for closure, and we're seeing delays in shutting down facilities.

    So we're in a situation now where actually many of the bases reportedly closed in 1993 and 1995, those communities still have yet to approach EDA for assistance in reusing and redeveloping their base properties.

    Secondly, and I think more importantly is the fact that the heavy cost of infrastructure investment at closing military basis has caught us all by surprise.

    When the base closure process began, we assumed that the military bases would offer state-of-the-art amenities that could easily be attractive to private investors. Well, the reality is actually the complete opposite of that. Most military bases suffer from inadequate roads, sewers, and utility systems. The base buildings often lack simple amenities, violate local building codes, and suffer from a host of other problems.

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    Restoring these facilities or linking the base with the local community infrastructure requires significant investments. For example, recent survey of closing bases in California identified estimated infrastructure costs per base ranging anywhere from $113 million to $200 million in new investments per facility.

    Now, EDA investments do provide a type of long-term infrastructure finance needed for this purpose, but with grants averaging only $1.7 million each, EDA support is clearly insufficient to meet these infrastructure needs.

    Obviously, EDA cannot and should not be expected to pick up the tab for all these infrastructure needs; however, we should examine reforms that can help leverage additional funding through strategic EDA investments and help foster more efficient use of limited EDA funds.

    Let me now turn to my recommendations that the subcommittee might consider in its legislation.

    First off, I would urge this subcommittee to continue to support a separate defense adjustment account at EDA. This program continues to provide a crucial lifeline for communities impacted by defense downsizing. I would urge you to support the continuation of this effort and, more specifically, to support the Administration's funding request of $89 million. This funding level is the absolute minimum needed to meet the heavy demand for EDA assistance.

    Secondly, I would urge you to enhance the Office of Economic Conversion Information, which I previously directed. This is a very successful and very popular tool, and it helps with what should be a key role of the Economic Development Administration: dissemination of best practices.
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    Internet technology is an important tool in this type of information dissemination, and the EDA needs to support and expand this effort in both defense and non-defense areas.

    Finally and most importantly, I would urge you to consider new ways to leverage limited EDA dollars. While additional funding would certainly be helpful, more money is not going to solve the problem of infrastructure financing at closing military bases. What's needed are innovative techniques to use limited Federal dollars in ways that best leverage private investment. Ultimately, it's private dollars, not public money, that will spur effective military base reuse.

    Since EDA supports many different types of projects, I can't offer you a one-size-fits-all solution. In general, I would urge you to encourage experimentation through support of pilot projects and other new initiatives, but a couple of specific suggestions for the subcommittee to consider.

    First off, I would encourage EDA to use revolving loan funds more frequently rather than grant assistance when it comes to funding infrastructure and funding defense adjustment programs. While grants are relatively simple to manage, they do not provide an opportunity to truly leverage the Federal investment. Your only leverage is really the matching funds that come from private or State or local sources.

    If infrastructure projects could be financed through revolving loan funds, grantees could recycle the principal and interest payments into new loans.
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    The second thing I would urge—and I echo my colleagues from NADO—is securitization and defederalization of existing revolving loan fund portfolios.

    EDA already supports an effective program of more than 480 revolving loan funds. EDA local grantees have expressed interest in securitizing these loan packages. The subcommittee should encourage and support this initiative as an effective means to recycle EDA dollars and better leverage private capital.

    Finally, I would urge you to support improved targeting of base closure assistance. In addition to leveraging, we also need to better focus where EDA defense assistance grants go. This assistance should focus almost exclusively on a very highly-targeted grouping of communities where strategic investments can provide a long-term foundation for economic growth.

    Many base closure communities are going to prosper and recover on their own. EDA investments should not go into those communities, even if those communities are eligible for assistance.

    This triage type of approach may sound harsh, but when we have many, many well-deserving communities interested in very limited Federal dollars, we have to put the money where the investments can do the most good.

    Let me conclude by reiterating my primary point: EDA's current defense adjustment program works very well. No other Federal initiative can flexibly respond to the myriad challenges of defense adjustment and defense conversion. We don't need a cookie cutter approach; instead, we need programs that are responsive to local needs and direction.
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    The challenge for the subcommittee is to help ensure that these initiatives can do more good in more places. This is a very difficult task, as you know, in today's tight budget environment. What we need is a willingness to consider new ideas, pilot projects, and experiments that can help us do more with less.

    I look forward to working with the subcommittee in this effort. Thank you.

    Mr. KIM. Thank you.

    Mr. Traficant?

    Mr. TRAFICANT. You sound like a true politician with a math background.


    Mr. TRAFICANT. You're showing me something, Dr. Pages.

    Two things I'd like to say, as the former director of the Office of Economic Conversion Information, I think that you did a good job with that. That's a good program.

    Dr. PAGES. Thank you very much, sir.
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    Mr. TRAFICANT. And I think that that, though, dealing basically with defense adjustment types of activity, would you be opposed to an idea that we have of maybe creating an Office of Economic Development Information within EDA that would take along that line and broaden and expand it to all economic development?

    Dr. PAGES. I would give you 100 percent support for that effort. There is no difference between defense adjustment and economic development. The only difference is the cause of the dislocation. There's no reason why it should be solely focused on defense programs, because what you do in defense is what you ought to be doing in any community.

    Mr. TRAFICANT. Second of all, as you know, you sat through this hearing. I am firmly convinced that we've got to incentivize that private sector and bring them in, and I think you're exactly right. We have a tendency over the years to find a problem and throw money at it, and it hasn't worked in anything.

    I want to tie in with that revolving loan fund those interest rate buy-downs. And I think if we could do that, my point is the banking community that is going to qualify these loans is saying, ''Look, this isn't just a feel-good type of thing. They can make it happen. We think it's a good project. We're going to invest our money.''

    What kind of money do you think would be necessary, on a demonstration type of basis, to take a couple poverty areas of the country and put an incentivized program like that together with a revolving loan fund and try to stabilize it? What do you think would be a pilot type of thing?
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    Dr. PAGES. I would like to pass on that and provide you a written response, not having thought about it in sufficient detail.

    Mr. TRAFICANT. You politician, you.


    Dr. PAGES. I'd be happy to follow up.

    [The information received follows:]

    [Insert here.]

    Dr. PAGES. However, I would say that I think it would need to be a larger package than the traditional EDA revolving loan funds, which tend to be several million dollars.

    Mr. TRAFICANT. Yes.

    Dr. PAGES. It needs to be significantly larger than that.

    Mr. TRAFICANT. In these tough times for money, though, it's hard just to carve anything out in the form of an appropriation, since there has been no authorization.
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    Dr. PAGES. That is the benefit of the revolving loan fund effort, that small investment can bring you a significant amount of Federal dollars.

    Mr. TRAFICANT. I want to thank you for your testimony. As a politician, you did quite well here.

    Dr. PAGES. Thank you.

    Mr. KIM. Any other questions from the Members?

    Mr. COOKSEY. Just a comment. England Air Park, which was England Air Force Base, is in the southern end of my district, and it has been a real success story.

    Dr. PAGES. Yes. I call that the ''base closure poster child.''

    Mr. COOKSEY. It really was. It was the first in the country. Actually, I just ran for Congress last fall and played no part in it, but I've been familiar with it from day one, and it is very successful and we're continuing to expand and continue to bring other companies in there, and it is really serving as sort of an incubator, too, for businesses, and some really good businesses. There's even one international business now.

    Dr. Young, I struggled with statistics when I was in my MBA program. I am an M.D., but I did go back and get an M.B.A., so I respect your Ph.D. in statistics.
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    Mr. KIM. Thank you. I have no questions. Thank you very much.

    Anybody else wish to make closing remarks?

    [No response.]

    Mr. KIM. No? I'd like to make one comment. I think it is an excellent hearing today, excellent testimony. I think it was put together well. But I do have one concern.

    I didn't hear anybody criticize EDA today. It's mostly ''jobs well done,'' and etc. But I want to remind you that more than 150 Members of Congress consistently oppose EDA reauthorization, and next time I'd like to have some opponents' point of views. Why is it? Why do they oppose this? One or two, at least, or otherwise looks like all orchestrated or fixed. I like to listen to other view, as well. So next time when you put together a hearing like this let's invite some opponents so we can hear some other side.

    Mr. TRAFICANT. Would the chairman yield?

    Mr. KIM. Yes. I'd be more than happy to.

    Mr. TRAFICANT. The director, Mr. Singerman, has gone ahead and stacked this thing in his favor. That's the way it works down here. See, that's the political science part of it.
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    Mr. TRAFICANT. Let me say one thing in seriousness here. Maybe everybody, in their zeal to cut and put trophies on the wall, has overlooked some programs that have a basic real good synergism and create a networking between our Federal Government and our local community, and maybe EDA and ARC, although they've been tagged for this trophy on the wall, maybe there is some real good community development that has come from them for some real needy people. Maybe what we have to do is make it fairer and hopefully we could sunset some day.

    Mr. KIM. All right. Thank you.

    Mr. COOKSEY. Mr. Chairman, just a similar comment.

    I, too, have actually enjoyed this hearing. You know, we've had some rather acrimonious hearings, particularly when we saw what the Government was doing to these Federal buildings. I mean, that was a disgrace, and particularly the building in Atlanta. I think it's nice to have sort of a lovefest occasionally, and this has been a very good hearing.


    Mr. KIM. Well, if there are no further questions, the subcommittee stands adjourned. Thank you very much.

    [Whereupon, at 11:49 a.m, the subcommittee was adjourned, to reconvene at the call of the Chair.]
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